PART II AND PART III - PRELIMINARY OFFERING CIRCULAR DATED MAY 15, 2017
Amendment No. 1

True Leaf Medicine International Ltd.

Head Office

100 Kalamalka Lake Road, Unit 32
Vernon, British Columbia V1T 9G1
778-389-9933

https://trueleafpet.com/

up to

14,285,715

COMMON SHARES

SEE "SECURITIES BEING OFFERED" AT PAGE 62

Sales of these securities will commence as soon as practicable after this offering circular has been qualified by the Securities and Exchange Commission.

This offer will terminate on the earlier of: (1) the sale of the maximum number of common shares offered hereby, (2) one year from the date this offering begins, or (3) a date prior to one year from the date this offering begins that is so determined by our board of directors. Since there is no minimum amount of securities that must be purchased,

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all investor funds will be available to us on commencement of this Offering on one or more closings, which may take place at our discretion at any time. Investor funds will not be returned even if an insufficient number of shares are sold to cover the expenses of this offering and provide net proceeds to us.

THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION DOES NOT PASS UPON THE MERITS OF OR GIVE ITS APPROVAL TO ANY SECURITIES OFFERED OR THE TERMS OF THE OFFERING, NOR DOES IT PASS UPON THE ACCURACY OR COMPLETENESS OF ANY OFFERING CIRCULAR OR OTHER SELLING LITERATURE. THESE SECURITIES ARE OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION WITH THE COMMISSION; HOWEVER, THE COMMISSION HAS NOT MADE AN INDEPENDENT DETERMINATION THAT THE SECURITIES OFFERED HEREUNDER ARE EXEMPT FROM REGISTRATION.

GENERALLY, NO SALE MAY BE MADE TO YOU IN THIS OFFERING IF THE AGGREGATE PURCHASE PRICE YOU PAY IS MORE THAN 10% OF THE GREATER OF YOUR ANNUAL INCOME OR NET WORTH. DIFFERENT RULES APPLY TO ACCREDITED INVESTORS AND NON-NATURAL PERSONS. BEFORE MAKING ANY REPRESENTATION THAT YOUR INVESTMENT DOES NOT EXCEED APPLICABLE THRESHOLDS, WE ENCOURAGE YOU TO REVIEW RULE 251(d)(2)(i)(C) OF REGULATION A. FOR GENERAL INFORMATION ON INVESTING, THE COMPANY ENCOURAGES YOU TO REFER TO www.investor.gov.

This offering is inherently risky. See "Risk Factors" on page 3.

The company is following the "offering circular" format of disclosure under Regulation A.

AN OFFERING STATEMENT PURSUANT TO REGULATION A RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. INFORMATION CONTAINED IN THIS OFFERING CIRCULAR IS SUBJECT TO COMPLETION OR AMENDMENT. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED BEFORE THE OFFERING STATEMENT FILED WITH THE COMMISSION IS QUALIFIED. THIS OFFERING CIRCULAR SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR MAY THERE BE ANY SALES OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL BEFORE REGISTRATION OR QUALIFICATION UNDER THE LAWS OF SUCH STATE. THE COMPANY MAY ELECT TO SATISFY ITS OBLIGATION TO DELIVER A FINAL OFFERING CIRCULAR BY SENDING YOU A NOTICE WITHIN TWO BUSINESS DAYS AFTER THE COMPLETION OF THE COMPANY'S SALE TO YOU THAT CONTAINS THE URL WHERE THE FINAL OFFERING CIRCULAR OR THE OFFERING STATEMENT IN WHICH SUCH FINAL OFFERING CIRCULAR WAS FILED MAY BE OBTAINED.

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TABLE OF CONTENTS

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This offering circular contains forward-looking statements that involve risk and uncertainties. These statements relate to financial conditions and prospects, lending risks, plans for future business development and marketing activities, capital spending and financing sources, capital structure, the effects of regulation, and competition and the prospective business of the company. In some cases, these statements can be identified with forward looking words such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "project," "plan," "will," "would". Investors should be aware that all forward-looking statements could differ materially from those anticipated in these forward-looking statements based on many factors. The company believes these factors include, but are not limited to, the "Risk Factors" found on page 3 of this offering circular. These factors should not be construed as exclusive and should be read in conjunction with other cautionary statements in this offering circular.

CURRENCY AND EXCHANGE RATES

All dollar amounts in this offering circular are expressed in Canadian dollars unless otherwise indicated. Our accounts are maintained in Canadian dollars and our financial statements are prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.  All references to "U.S. dollars", "USD", or "US$" are in United States dollars.

The following table sets forth the rate of exchange for the Canadian dollar (expressed in United States dollars) in effect at the end of the periods indicated. The table also indicates the average of the exchange rates in effect during such periods and the high and low exchange rates during such periods based on the noon rate of exchange as reported by the Bank of Canada for conversion of Canadian dollars into United States dollars.

SUMMARY

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The SEC requires the company to identify risks that are specific to its business and its financial condition. The company is still subject to all the same risks that all companies in its business, and all companies in the economy, are exposed to. These include risks relating to economic downturns, political and economic events and technological developments (such as hacking and the ability to prevent hacking). Additionally, early-stage companies are inherently riskier than more developed companies. You should consider general risks as well as specific risks when deciding whether to invest.

The existence of material uncertainties may cast significant doubt on our ability to continue as a going concern. Our auditor has issued an opinion on our consolidated financial statements which states that the consolidated financial statements were prepared assuming we will continue as a going concern and further states that our recurring losses from operations, shareholders' deficit and inability to generate sufficient cash flow to meet our obligations and sustain our operations raise may cast significant doubt on our ability to continue as a going concern.

Our success depends in part on our ability to attract and retain additional key skilled professionals which we may or may not be able to do. Our failure to do so could prevent us from achieving our goals or becoming profitable.  Our success will depend on the ability of our directors and officers to develop our business and manage our operations. It will also depend on our ability to attract and retain key quality assurance, scientific, sales, public relations, and marketing staff or consultants once operations begin. The loss of any key person or the inability to find and retain new key persons could have a material adverse effect on our business. Competition for sales and marketing staff as well as officers and directors - can be intense; therefore, no assurance can be provided that we will be able to attract or retain key personnel in the future. This may adversely impact our operations.

We will need a significant amount of capital to carry out our proposed business plan. Unless we are able to raise sufficient funds, we may be forced to discontinue our operations.  We are in the development stage and will likely operate at a loss until our business becomes established. We will require additional financing in order to fund future operations. Our ability to secure any required financing in order to commence and sustain our operations will depend, in part, upon prevailing capital market conditions, as well as our business success.  There can be no assurance that we will be successful in our efforts to secure any additional financing or additional financing on terms satisfactory to our management. If additional financing is raised by issuing common shares, control may change and shareholders may suffer additional dilution. If adequate funds are not available or they are unavailable on acceptable terms, we may be required to scale back our business plan or cease operating.

We are a start-up company with limited revenues. There is no assurance that our future operations will result in revenues or profits. If we cannot generate sufficient revenues to operate profitably, we may suspend or cease our operations.  We are a start-up company and we have limited revenues. Our proposed marijuana production business cannot move forward until we receive approval from Health Canada. Our success in the interim depends, in part, upon our ability to persuade customers to purchase our branded pet products which may be more expensive than other products available in the pet industry. If we are unable to attract and retain customers, or if we are not able to do so in a manner that results in profitability, we may have to suspend or cease operations.

We are subject to significant risks associated with introducing new products including the risk that our new product developments will not produce sufficient sales to recoup our investment. Our pet support supplements and chews include ingredients not traditionally found in such products. Our success will depend on our ability to build a following for our products. We cannot assure you that we will be successful in achieving market acceptance of our products. Our failure to successfully market and build a customer base for our products could harm our ability to grow our business and could have a material adverse effect on our business, results of operations and financial condition.

We may not be able to successfully implement our growth strategy on a timely basis or at all. Our future success depends, in large part, on our ability to implement our growth strategy, including expanding distribution in Canada, United States and Europe, attracting new consumers to our brand, introducing new products and product line extensions, and expanding into new markets. Our ability to implement this growth strategy depends, among other things, on our ability to:

• enter into distribution and other strategic arrangements with retailers and other potential distributors of our products;
• expand and maintain brand loyalty;
• effectively compete with specialty pet products;
• secure shelf space in stores;
• increase our brand recognition by effectively implementing our marketing strategy and advertising initiatives;
• develop new products and product line extensions that appeal to consumers;
• maintain sources for the required supply of quality raw ingredients to meet our growing demand; and
• identify and successfully enter and market our products in new geographic markets and market segments.

We may not be able to successfully implement our growth strategy and may need to change our strategy. If we fail to implement our growth strategy or if we invest resources in a growth strategy that ultimately proves unsuccessful, our business, financial condition and results of operations may be materially adversely affected.

We rely on co-packers to provide our supply of pet supplement and treat products. Any failure by co-packers to fulfill their obligations or any termination or renegotiation of our co-packing agreements could adversely affect our results of operations. We have supply agreements with co-packers that require them to provide us with specific finished products. We rely on co-packers as our sole-source for our products. The failure for any reason of a co-packer to fulfill its obligations under the applicable agreements with us or the termination or renegotiation of any such co-packing agreement could result in disruptions to our supply of finished goods and have an adverse effect on our results of operations. Additionally, from time to time, a co-packer may experience financial difficulties, bankruptcy, or other business disruptions which could disrupt our supply of finished goods. It may also require that we incur additional expenses from the need to provide financial accommodations to the co-packer or taking other steps to minimize or avoid supply disruption, such as establishing a new co-packing arrangement with another provider. During an economic downturn, our co-packers may be more susceptible to experiencing such financial difficulties, bankruptcies or other business disruptions. A new co-packing arrangement may not be available on terms as favorable to us as the existing co-packing arrangement, if at all.

If we do not manage our supply chain effectively, including inventory levels, our business, financial condition and results of operation may be adversely affected. The inability of any supplier, co-packer, third-party distributor or transportation provider to deliver or perform for us in a timely or cost-effective manner could cause our operating costs to increase and our profit margins to decrease. We must continuously monitor our inventory and product mix against forecasted demand or risk having inadequate supplies to meet consumer demand as well as having too much inventory on hand that may reach its expiration date and become unsaleable. If we are unable to manage our supply chain effectively and ensure that our products are available to meet consumer demand, our operating costs could increase and our profit margins could decrease.

Failure by our transportation providers to deliver our products on time or at all could result in lost sales. We use third-party transportation providers for our product shipments. We rely on a number of different providers for our shipments based on cost efficiency and availability at the time of shipping. Transportation services include scheduling and coordinating transportation of finished products to our customers, shipment tracking and freight dispatch services. Our use of transportation services for shipments is subject to various risks. One risk is that increases in fuel prices would raise our shipping costs. Another risk is that employee strikes or inclement weather may impact the ability of providers to provide delivery services that adequately meet our shipping needs including adequate refrigeration while in-transit. Any such change could cause us to incur costs and expend resources. Moreover, in the future we may not be able to obtain terms as favorable as those we receive from the third-party transportation providers that we currently use which, in turn, would increase our costs and thereby adversely affect our business, financial condition, and results of operations.

We may face difficulties as we expand in and into countries in which we have no prior operating experience. We have recently launched sales of our products in the United States and Europe. We intend to continue to expand in and into countries in which we have no prior operating experience. From time to time, we expect to encounter foreign economic, political, regulatory, personnel, technological, and language barriers and other risks that may increase our expenses or delay our ability to become profitable in such countries. These risks include:

• the risk that we must spend significant amounts of time and money to build brand recognition without certainty that we will be successful;
• currency fluctuations, including, without limitation, fluctuations in the foreign exchange rate of the Euro, British Pound, Canadian dollar, and the U.S. dollar;
• the difficulty of enforcing agreements and collecting receivables through some foreign legal systems;
• potentially longer payment cycles and greater difficulty in collecting accounts;
• changes in local tax laws, tax rates in some countries that may exceed those of the United States or Canada lower earnings due to withholding requirements or the imposition of tariffs, exchange controls or other restrictions;
• changes in economic conditions, consumer preferences, or demand for our products in these markets;
• the credit risk of local customers and distributors;
• unexpected changes in legal, regulatory or tax requirements;
• differences in culture and trends in foreign countries with respect to pets and pet care;
• the risk that certain governments may adopt regulations or take other actions that would have a direct or indirect adverse impact on our business and market opportunities, including nationalization of private enterprise; and
• potential non-compliance with applicable currency exchange control regulations, transfer pricing regulations or other similar regulations;

In addition, our expansion into new countries may require significant resources and the efforts and attention of our management and other personnel, which will divert resources from our existing business operations. As we expand our business globally, our success will depend, in large part, on our ability to anticipate and effectively manage these and other risks associated with our operations outside of Canada.

Competition in the markets in which we operate, including internet-based competition, is strong. If we are unable to compete effectively, our ability to generate sales may suffer and our operating income and net income could decline. We are one of many companies in the consumable pet products market with no measurable percentage of that market. Our competition in the healthy feeding systems and healthy consumable products markets are both domestic and foreign companies, many of whom manufacture their products in low cost areas such as India, East Asia, Southeast Asia, and Mexico. Many of these companies also have more brand awareness. We are still building our market presence. Any reputation that we may successfully gain with retailers for quality products does not necessarily translate into name recognition or increased market share with the end consumer.

We compete with a significant number of companies of varying sizes, including divisions or subsidiaries of larger companies who may have greater financial resources and larger customer bases than we have. As a result, these competitors may be able to identify and adapt to changes in consumer preferences more rapidly than we can due to their larger resource base and scale. They may also be more successful in marketing and selling their products, better able to increase prices to reflect cost pressures, and more capable in increasing their promotional activity, which may impact us and the entire pet food industry.

We also compete with other smaller niche market companies focused on the same area of the consumable pet food markets we have entered. These companies may be more innovative and/or able to bring products to market faster and move more quickly to exploit and serve niche markets than we are. If these competitive pressures cause our products to lose or unable to gain market share, our business, financial conditions and results of operations may be materially adversely affected.

The loss of any of our key suppliers, or distribution arrangements with key vendors, would negatively impact our business. We purchase significant amounts of products from vendors with differing supply capabilities. There can be no assurance that the vendors who currently supply us with the ingredients necessary to create our pet chews will be able to accommodate the anticipated growth and expansion of our locations and e-commerce. An inability of our existing vendors to provide products in a timely or cost-effective manner may impair our business, financial condition and results of operations.

We maintain no long-term supply contracts with any of our distributors. As a consequence, any distributor may discontinue selling our pet chews at any time which would result in the inability to sell our products in certain retail locations. The loss of any of our vendors would, therefore, have a negative impact on our business and financial condition

If we are unable to identify or enter into supply or distribution relationships with new vendors or to replace the loss of any of our existing vendors, we may experience a competitive disadvantage, our business may be disrupted, and our results of operations may be adversely affected.

We may be exposed to significant product liability claims which our insurance may not cover and which could harm our reputation. In the ordinary course of our business, we may be named as a defendant in lawsuits involving product liability claims. In any such proceeding, plaintiffs may seek to recover large and sometimes unspecified amounts of damages and the matters may remain unresolved for several years. Any such matters could have a material adverse effect on our business, results of operations and financial condition if we are unable to successfully defend against or settle these matters or if our insurance coverage is insufficient to satisfy any judgments against us or settlements relating to these matters. Although we have product liability insurance coverage and an excess umbrella policy, our insurance policies may not provide coverage for certain or any claims against us or may not be sufficient to cover all possible liabilities. Additionally, we do not maintain product recall insurance. We may not be able to maintain such insurance on acceptable terms, if at all, in the future. Moreover, any adverse publicity arising from claims made against us, even if the claims are not successful, could adversely affect the reputation and sales of our products. In particular, product recalls or product liability claims challenging the safety of our products may result in a decline in sales for a particular product and could damage the reputation or the value of the related brand. This could be true even if the claims themselves are ultimately settled for immaterial amounts. This type of adverse publicity could occur and product liability claims could be made in the future.

We face various risks as an ecommerce retailer, if we do not manage these risks effectively, our ability to generate sales may suffer and our operating income and net income may decline. Although ecommerce represents a growing segment of the pet industry, ecommerce operations are still in the early stages of development. We may require additional capital in the future to sustain or grow our ecommerce business. Business risks related to our ecommerce business include our ability to keep pace with rapid technological change, failure in our security procedures and operational controls, failure or inadequacy in our systems or ability to process customer orders, government regulation and legal uncertainties with respect to ecommerce, and collection of sales or other taxes by one or more states or foreign jurisdictions. If any of these risks materialize, it could have an adverse effect on our business.

Increased transactions through our website may result in a reduction in sales at store locations that sell our products. There is a risk that vendors who sell our products may decide to discontinue the sale of our products due to a reduction in sales. If vendors decide to discontinue the sale of our products, this could reduce our exposure to new or potential customers, therefore having an adverse effect on our business.

In addition, we face competition from established companies who sell their products online and have a large customer base. In the future, we may also face competition from internet retailers who enter the market. A failure to positively differentiate our product and services offerings from other internet retailers could have a materially- adverse effect on our business, results of operations, or financial condition.

If we are unable to protect the confidentiality of our proprietary information and know-how, the value of our technology, products and services could be harmed significantly. We rely on trade secrets, know-how and other proprietary information in operating our business. If this information is not adequately protected, then it may be disclosed or used in an unauthorized manner. To the extent that consultants, key employees or other third parties apply technological information independently developed by them or by others to our proposed products, disputes may arise as to the proprietary rights to such information, which may not be resolved in our favor. The risk that other parties may breach confidentiality agreements or that our trade secrets may become known or independently discovered by competitors could harm us by enabling our competitors, who may have greater experience and financial resources, to copy or use our trade secrets and other proprietary information in the advancement of their products, methods or technologies. The disclosure of our trade secrets would impair our competitive position,

thereby weakening demand for our products or services and harming our ability to maintain or increase our customer base.

We have not commenced operations and are currently seeking to lay the foundation to commence our business. We have not received a marijuana production license from Health Canada and there can be no assurance that we will receive a production license.  Until we receive a production license, we cannot begin the production, sale and distribution of medical marijuana.  It is currently not known when or if we will be granted a production license.  The key milestones to obtaining a production license include filing an application, receiving a pre-licensing approval notice, completion of the upgrades as per the application, approval to produce upon inspection of the facility, and approval to distribute the product to patients. 

We are subject to all of the business risks and uncertainties associated with any new business enterprise, including the risks that we will be unable to acquire the necessary production license, successfully produce the product, or establish a market for our product. If we receive a production license, we anticipate at least 12 months from the date of grant of this production license to achieve positive cash flow from operations. There can be no assurance that consumer demand for our product will be as anticipated, or that we will become profitable. As a result, an investment in our common shares involves a high degree of risk and should only be acquired if you can afford to lose your entire investment.

Our proposed marijuana business is subject to significant regulation by the Canadian Federal Government. There is no assurance that we will be granted licensed producer status by Health Canada. Any continued failure or delay in obtaining such status would materially and adversely affect our operations. We depend heavily on the success of acquiring a production license from Health Canada to be able to grow, store and distribute medical marijuana in Canada. There is no assurance that we will be approved by Health Canada or will be granted licensed producer status. Should we be unable to obtain all required licenses, or if the regulations in Canada continue to change, our proposed marijuana production business would not be able to operate or there could be a significant cost to change our operations to remain compliant with the laws and regulations.

Once a production license is obtained, any failure to comply with the terms of the production license, or any failure to renew the production license after its expiry date would have a materially-adverse impact on the financial condition and operations of our business.

Our operations are subject to regulations promulgated by government regulatory agencies from time to time. The cost of compliance with changes in governmental regulations has the potential to reduce the profitability of operations. However, there can be no guarantee that we will be able to obtain and maintain, at all times, all necessary licenses and permits required to carry out our business.

There are many regulations and governmental agencies that regulate the medical marijuana industry, and there will likely be increased and/or changing regulations as the industry becomes more mainstream with more participants. Our proposed marijuana production operations are subject to a variety of laws, regulations and guidelines relating to the manufacture, management, transportation, storage and disposal of medical marijuana but also including laws and regulations relating to health and safety, the conduct of operations and the protection of the environment. While, to the knowledge of management, we are currently in compliance with all such laws, changes to such laws, regulations and guidelines due to matters beyond our control may cause adverse effects to our operations.

There are sales risks associated with the cannabis and medical marijuana industry because cannabis is a controlled substance. As cannabis is a controlled substance in Canada, direct consumer marketing is not allowed. All products can only be prescribed by a physician and, to be successful, companies will have to develop programs targeted to this group. Traditionally in this sector, growers have targeted users as opposed to the doctors. The new regulations will change this traditional approach and will require growers to target doctors. If we are unable to properly conduct sales in a regulated environment or target the appropriate audiences for our medical marijuana products, our results of operations and business prospects could be substantially impaired.

We may not be able to use the facilities as planned and will, therefore, not be able to commence operations on the timetable or the scale that we have planned. To date, our proposed marijuana production activities and resources have been primarily focused on our proposed facility in Lumby, BC and we will continue to be focused on this facility for the foreseeable future. Adverse changes or developments affecting the facility, including but not limited to a breach of security, could have a material and adverse effect on our business, financial condition and prospects. Any breach of the security measures and other facility requirements, including any failure to comply with recommendations or requirements arising from inspections by Health Canada, could also have an impact on our ability to continue to operate under any license we may receive.

We may not acquire market share or achieve profits due to competition in the medical marijuana industry. We will face intense competition from other companies, some of which can be expected to have longer operating histories, more financial resources, and greater manufacturing and marketing experience than us. Increased competition by larger and better financed competitors could materially and adversely affect our business, financial condition, and results of operations.

Because of the early stage of the industry in which we plan to operate, we expect to face additional competition from new entrants. If the number of users of medical marijuana in Canada increases, the demand for products will increase, and we expect that competition will become more intense as current and future competitors begin to offer an increasing number of diversified products. To remain competitive, we will require a continued high level of investment in research and development, marketing, sales, and client support. We may not have sufficient resources to maintain research and development, marketing, sales, and client support efforts on a competitive basis which could materially and adversely affect our proposed marijuana production business, financial condition and results of operations.

Investors in this offering will experience immediate and substantial dilution. Investors in this offering will suffer immediate and substantial dilution of $0.2794 per share or approximately 79.82% of the offering price of the common shares if the maximum offering is sold or $0.2228 per share or approximately 94.04% of the offering price if only 25% of the offering is sold. See "Dilution."

If we issue additional common shares, shareholders may experience further dilution in their ownership of us. We are authorized to issue an unlimited number of common shares without par value and an unlimited number of preferred shares without par value. We have the right to raise additional capital or incur borrowings from third parties to finance our business. Our board of directors has the authority, without the consent of any of our shareholders, to cause us to issue more common shares. Consequently, shareholders may experience more dilution in their ownership of us in the future. Our board of directors and majority shareholders have the power to amend our constating documents in order to affect forward and reverse stock splits, and recapitalizations of the company. The issuance of additional common shares by us would dilute all existing shareholders' ownership in us.

We cannot assure that we will ever pay dividends. We do not currently anticipate declaring and paying dividends to our shareholders in the near future. It is our current intention to apply net earnings, if any, in the foreseeable future to increase our capital base and marketing. Prospective investors seeking or needing dividend income or liquidity should therefore not purchase our common shares. We cannot assure that we will ever have sufficient earnings to declare and pay dividends to the holders of our common shares, and in any event, a decision to declare and pay dividends is at the sole discretion of our board of directors.

We are controlled by our principal shareholder, Darcy Bomford, whose interests may differ from those of the other shareholders. Mr. Darcy Bomford is our C.E.O., director, founder, and principal shareholder. He currently owns directly and indirectly a total of 23,017,594 common shares or 38.09% of the total issued and outstanding common shares of our company. Mr. Bomford will own approximately 30.81% of the outstanding votes assuming the maximum 14,285,715 common shares are issued pursuant to this offering. 

Mr. Bomford, as our majority shareholder, is able to exercise significant control over all matters requiring shareholder approval including the election of directors and approval of significant corporate transactions. This concentration of ownership may have the effect of delaying or preventing a change in control and might adversely affect the market price of our common shares. This concentration of ownership may not be in the best interests of all of our shareholders.

Claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of money available to us. Our articles provide that we will indemnify our directors and officers in each case to the fullest extent permitted by the Business Corporations Act (British Columbia)(the "BCA"). We must indemnify our officers and directors against all reasonable fees, expenses, charges and other costs of any type or nature whatsoever. This includes any and all expenses and obligations paid or incurred in connection with investigating, defending, being a witness in, participating in (including on appeal), or preparing to defend against any completed, actual, pending or threatened action, suit, claim or proceeding, whether civil, criminal, administrative or investigative, or establishing or enforcing a right to indemnification under the indemnification agreement. Any claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of money available to us.

Future sales of our common shares or the perception that such sales may occur could depress our common share price. As of May 15, 2017, we had 60,427,383 common shares outstanding, and our notice of articles authorizes us to issue up to an unlimited number of common shares and an unlimited number of preferred shares. In the future, we may issue additional common shares or other securities if we need to raise additional capital. The number of new common shares issued in connection with raising additional capital could constitute a material portion of those current outstanding common shares. Any future sales of our common shares, or the perception that such sales may occur, could negatively impact the price of our common shares.

Our common shares are thinly traded and you may be unable to sell at or near asking price, or at all. We do not have a liquid market for our common shares, and we cannot predict the extent to which an active public market for trading our common shares will be achieved or sustained.

This situation is attributable to a number of factors including the fact that we are a small company that is relatively unknown to stock analysts, stockbrokers, institutional investors and others in the investment community who generate or influence sales volume. Even if we came to the attention of such persons, those persons tend to be risk-averse and may be reluctant to follow, purchase, or recommend the purchase of shares of an unproven company such as ours until such time as we become more seasoned and viable. As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. We cannot give you any assurance that a broader or more active public trading market for our common shares will develop or be sustained, or that current trading levels will be sustained.

The market price for our common shares may be volatile, which may result in a decline in value of your investment. The trading price of our common shares has been and may continue to be volatile. Securities markets worldwide experience significant price and volume fluctuations. This market volatility, as well as general economic, market or political conditions could reduce the market price of our common shares in spite of our operating performance. In addition, our results of operations could fail to meet the expectations of investors due to a number of potential factors, including variations in our quarterly results of operations, additions or departures of key management personnel, failure to meet our projected operational milestones, litigation and government investigations. Other factors which may affect the value of our common shares include: changes or proposed changes in laws, new regulations, or differing interpretations or enforcement of the law, adverse market reaction to any indebtedness we may incur or securities we may issue in the future, changes in market valuations of similar companies or speculation in the press or investment community, announcements by our competitors of significant contracts, acquisitions, dispositions, strategic partnerships, joint ventures or capital commitments, adverse publicity about our industry or individual scandals. All of these events could result in a decrease of the market price of our common shares. As a result, you may be unable to resell your common shares at or above the price you acquired our securities.

Because the SEC imposes additional sales practice requirements on brokers who deal in shares of penny stocks, some brokers may be unwilling to trade our securities. This means that you may have difficulty reselling your shares, which may cause the value of your investment to decline. Our shares are classified as penny stocks. The SEC has adopted regulations which generally define a "penny stock" to be any equity security that has a price of less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions including the issuer of the securities having net tangible assets (i.e., total assets less intangible assets and liabilities) in excess of $2,000,000 or an average revenue of at least $6,000,000 for the last three years. As a result, our common shares

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could be subject to these rules that impose additional sales practice requirements on broker-dealers who sell our securities to persons other than established customers and accredited investors (generally persons with a net worth in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together with their spouse). For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of such securities and have received the purchaser's written consent to the transaction prior to the purchase. Additionally, for any transaction involving a "penny stock," unless exempt, the rules require the delivery, prior to the transaction, of a risk disclosure document mandated by the SEC relating to the "penny stock" market. The broker-dealer must also disclose the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and, if the broker-dealer is the sole market maker, the broker-dealer must disclose this fact and the broker-dealer's presumed control over the market. Finally, monthly statements must be sent disclosing recent price information for the "penny stock" held in the account and information on the limited market in "penny stocks." Consequently, these rules may restrict the ability of broker-dealers to sell our securities.

Risks Related to Being a Canadian Issuer

As a Canadian incorporated and resident company, our financial statements are prepared using International Financial Reporting Standards ("IFRS"), accounting principles, which are different than the accounting principles under U.S. Generally Accepted Accounting Principles ("U.S. GAAP"). Our financial statements have been prepared in accordance with IFRS. IFRS is an internationally recognized body of accounting principles that are used by many companies outside of the United States to prepare their financial statements. Regulation A permits Canadian issuers such as True Leaf to prepare and file their financial statements in accordance with IFRS rather than U.S. GAAP. IFRS accounting principles are different from those of U.S. GAAP and SEC rules do not require us to provide a reconciliation of IFRS accounting principles to those of U.S. GAAP. Investors who are not familiar with IFRS may misunderstand certain information presented in our financial statements. Accordingly, we suggest that readers of our financial statements familiarize themselves with the provisions of IFRS accounting principles in order to better understand the differences between these two sets of principles.

Certain legislation in Canada contain provisions that may have the effect of delaying or preventing a change in control. Certain provisions of our constating documents and governing legislation, together or separately, could discourage potential acquisition proposals, delay or prevent a change in control and limit the price that certain investors may be willing to pay for the our common shares.

For example, under the BCA:

• certain matters require the approval of holders of two-thirds of the votes cast at a meeting of the company's shareholders, including amendments to its articles . This may make it more difficult for us to complete certain types of corporate transactions deemed advisable by the board of directors; and
• a bidder seeking to acquire us would need, on a compulsory acquisition (tender offer), to receive shareholder acceptance in respect to 90% of our outstanding shares. If this 90% threshold is not achieved in the offer, under the BCA, the bidder would not be able to complete a "second step merger" to obtain 100% control of us. Accordingly, an offer (tender) of 90% of our outstanding shares will likely be a condition in a tender offer to acquire our shares rather than 50% as is more common in tender offers for corporations organized under U.S. law.

Additionally,The Investment Canada Act requires that a "non-Canadian," as defined therein, file an application for review with the Minister responsible for the Investment Canada Act and obtain approval of the Minister prior to acquiring control of a Canadian business, where prescribed financial thresholds are exceeded. Otherwise, there are no limitations either under the laws of Canada or in our articles on the rights of non-Canadians to vote or hold our common shares. (Given our current size and industry we do not believe these rules would apply to us.)

Any of these provisions may discourage a potential acquirer from proposing or completing a transaction that may have otherwise presented a premium to our shareholders.

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Because we are a British Columbia incorporated company and the majority of our directors and officers are resident in Canada, it may be difficult for investors in the United States to enforce civil liabilities against us based solely upon the federal securities laws of the United States. We are incorporated in British Columbia and our principal place of business is in Canada. Our auditor and a majority of our directors and officers are residents of Canada. All or a substantial portion of our assets and those of such persons are located outside the United States. Consequently, it may be difficult for U.S. investors to affect service of process within the United States upon us or our directors, officers and auditors who are not residents of the United States or to realize in the United States upon judgments of U.S. courts predicated upon civil liabilities under the Securities Act of 1933, as amended. Investors should not assume that Canadian courts: (1) would enforce judgments of U.S. courts obtained in actions against us or such persons predicated upon the civil liability provisions of the U.S. federal securities laws or the securities or "blue sky" laws of any state within the United States or (2) would enforce, in original actions, liabilities against us or such persons predicated upon the U.S. federal securities laws or any such state securities or blue sky laws.

There could be adverse tax consequence for our shareholders in the United States if we are deemed a passive foreign investment company. Under United States federal income tax laws, if a company is, or for any past period was, a passive foreign investment company or PFIC, it could have adverse United States federal income tax consequences to U.S. shareholders even if the company is no longer a PFIC. The determination of whether we are a PFIC is a factual determination made annually based on all the facts and circumstances and thus is subject to change. Furthermore, the principles and methodology used in determining whether a company is a PFIC are subject to interpretation. While the company does not believe that it currently is or has been a PFIC, it cannot make any assurances that it will not be a PFIC in the future. United States purchasers of the company's common shares are urged to consult their tax advisors concerning United States federal income tax consequences of holding our common shares if we are considered to be a PFIC. See the discussion in "Material United States Federal Income Tax Considerations for U.S. Holders."

If we are a PFIC, U.S. holders would be subject to adverse U.S. federal income tax consequences such as the ineligibility for any preferred tax rates on capital gains, the ineligibility for actual or deemed dividends, interest charges on certain taxes treated as deferred, and additional reporting requirements under U.S. federal income tax laws or regulations. Whether or not U.S. holders make a timely qualified electing fund (or QEF) election or mark-to-market election may affect the U.S. federal income tax consequences to U.S. holders with respect to the acquisition, ownership, and disposition of our common shares and any distributions such U.S. holders may receive. Investors should consult their own tax advisors regarding all aspects of the application of the PFIC rules to our common shares.

DILUTION

Dilution means a reduction in value, control or earnings of the shares the investor owns.

Immediate Dilution

An early-stage company typically sells its shares (or grants options over its shares) to its founders and early employees at a very low cash cost, because they are, in effect, putting their "sweat equity" into the company. When the company seeks cash investments from outside investors, the new investors typically pay a much larger sum for their shares than the founders or earlier investors, which means the cash value of the new investors' stake is diluted because all the shares are worth the same amount and new investors paid more than earlier investors for their shares.

If you invest in our common shares in this offering, your ownership interest will be diluted to the extent of the difference between the offering price per share and the pro forma net tangible book value per share of our common shares. Our historical net tangible book value as of December 31, 2016, was $479,707, or approximately $0.0083 per share. Historical net tangible book value per share is determined by dividing the actual number of outstanding common shares by our net tangible book value. Dilution in historical net tangible book value per share represents the difference between the amount per share paid by purchasers of common shares in this offering and the pro forma net tangible book value per common share immediately after the closing of this offering.

After giving effect to the sale of 100% of the common shares under this offering at an assumed offering price of $0.35, after deducting estimated offering expenses payable by us and assumed commissions ($370,000), our pro forma net tangible book value as of December 31, 2016, would have been approximately $5,109,707, or $0.0706 per common share. This would represent an immediate increase in pro forma net tangible book value of $0.0623 per

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share to existing shareholders and an immediate dilution of $0.2794 per share to new investors purchasing common shares in this offering at an assumed offering price of $0.35 per share.

The following table illustrates this per share dilution:

Notes:

(1)  Marketing and other expenses include: (a) blue sky compliance and filing fees, and (b) fees to WhoYouKnow LLC and JOI Media Inc. We have engaged WhoYouKnow LLC (d/b/a CrowdfundX, to assist us with marketing for a flat fee of $225,000. We have also licensed software from JOI Media Inc. to streamline investor engagement on our website for a fee of $15,000 plus $1,750 per month. All amounts are estimates only by management.

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Payments to Officers and Directors

True Leaf will use a portion of the offering proceeds to make certain payments to officers and directors such as salaries, consulting fees or pursuant to other normal course contractual obligations. We believe these obligations reflect market rates for the services provided and are described in more detail elsewhere in this offering circular. See "Compensation of Directors and Officers" and "Interest of Management and Others in Certain Transactions".

Interim Investments

Company funds not needed on an immediate basis to fund our operations may be invested in government securities, money market accounts, deposits or certificates of deposit in commercial banks or savings and loan associations. Company funds may also be invested in bank repurchase agreements, funds backed by government securities, short-term commercial paper, or other similar interim investments.

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Alternative Use of Proceeds

We may reallocate the estimated use of proceeds among the various categories or for other uses if management deems such a reallocation to be appropriate.

We cannot assure that the capital budget will be sufficient to satisfy our operational needs or that we will have sufficient capital to fund our business. See "Description of Business" and "Risk Factors".

DESCRIPTION OF BUSINESS

This discussion should be read in conjunction with the other sections of this offering circular. These include "Risk Factors," "Use of Proceeds," and the Financial Statements attached with its related exhibits. The various sections of this discussion contain a number of forward-looking statements, all of which are based on our current expectations and could be affected by the uncertainties and risk factors described throughout this offering circular (see "Forward Looking Statements").

Overview

We are involved in two segments: (1) pet support supplements and chews; and (2) medical marijuana. We launched our pet supplement business in the fall of 2015. Our medical marijuana business was launched in 2013 but is currently on hold until we obtain regulatory approval from the Canadian government.

Pet Support Supplements and Chews. In the fall of 2015, through TL Pet we launched our hemp based pet supplement products. On December 30, 2016, we acquired the assets and intellectual property of OregaPet^TM , a Canadian brand of natural supplement products for pets. We share the commitment of our customers to improve the overall health of their pets with natural ingredients. Our products are primarily sold through a combination of direct sales and brokers to veterinarians, food retailers, food wholesalers, drug stores, club stores, mass merchandisers, discount and dollar stores, natural foods stores and distributors, and pet specialty stores.

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Medical Marijuana. In 2013, through TL Medicine we applied to become a licensed producer of medical marijuana under Canada's Marihuana for Medical Purposes Regulations ("MMPR") program administered by Health Canada. As of May 15, 2017 , we do not have a license with the MMPR and no products are in commercial production or use. We have not been granted an MMPR license and will be required to satisfy additional obligations in order to qualify including the completion of a compliant facility on a parcel of leased land in Lumby, British Columbia. There is a significant risk that we will not receive an MMPR license, thus rendering us unable to proceed with this sector of our business model. We continue to work diligently to comply with all of the requirements of Health Canada.

Corporate Structure

True Leaf Medicine International Ltd. (the "True Leaf" or the "company") is a British Columbia corporation formed on June 9, 2014.

We have four subsidiaries: True Leaf Investments Corp. ("TL Investments"), True Leaf Medicine Inc. ("TL Medicine"), True Leaf Pet Inc. ("TL Pet") and True Leaf Pet Europe LLC Sàrl ("TL Europe"). TL Investments, TL Medicine and TL Pet were formed in British Columbia on March 26, 2014, July 4, 2013 and November 18, 2015 respectively. TL Europe was formed in Luxemburg on July 18, 2016. (0.4% of TL Europe is owned by our operations manager in Luxembourg.)

Our Corporate Structure

We are a reporting issuer in Canada. Our common shares trade on the Canadian Securities Exchange under the trading symbol: "MJ" and on the Frankfurt stock exchange under the trading symbol: "TLA".

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Pet Support Supplements and Chews

Our products are developed and marketed for the purpose of improving the health, comfort, enjoyment and safety of our customers' pets. We love animals and believe they deserve quality food and care.

In the fall of 2015, TL Pet entered the natural pet product sector with a product line consisting of innovative hemp-based functional pet chews sold to the specialty pet and veterinary markets in Canada. We have since expanded sales into the United States and Europe and have recently acquired the assets of another natural pet brand.

It is our belief that consumers are looking for higher quality products that address nutritional needs common to their pets, without having to worry about food safety or harmful side effects. Products containing hemp including hemp seed oil, hemp protein and hemp extracts are gaining significant acceptance as evidence of their nutritional effectiveness becomes recognized.  

Industry

Euromonitor, Pet Care Global Overview 2015 and the Future Ahead, 2015

We compete in the North American dog and cat food market with 2014 retail sales of over $22 billion and growing at an average compounded annual growth rate of 3% from 2007 to 2014, according to Euromonitor.

We believe the following trends are driving growth in our industry:

• Pet ownership. The Alberta Agriculture and Forestry department estimates that 7.5 million or 57% percent of Canadian households own pets. Higher income households ($100,000+) are 21% of the population in Canada but account for roughly 25% of pet owners. Consumers in the 45 to 54-year age group are well ahead of the average with a pet ownership level of 75%. The American Veterinary Medical Association 2015-2016 survey estimated that 163.6 million or 65% of American households owned a dog or a cat. More U.S. households today have pets than have children, which we believe to be a result of demographic shifts and changing attitudes toward pets.
• The personification of pets as they become members of our family. The Alberta Agriculture and Forestry department found that eighty-six percent of dog owners and 89% of cat owners in Canada consider their pets to be part of the family. Dog owners believe their pets offer them improved physical health while cat owners believe their pets offer them improved metal health. Pet owners are generally in line with national averages in terms of their health-related psychographics and behavior but are slightly more likely to gravitate toward products that offer natural formulations and enhanced health benefits.  These findings have also been supported in the United States. According to the American Veterinary Medical Association, 66.7% of pet owners view their pets as members of the family. (Packaged Facts believes this percentage is closer to 83%.) As pets are increasingly viewed as companions, friends and family members, pet owners are being transformed into "pet parents" who spare no expense for their loved ones, driving premiumization across pet categories. This trend is reflected in food purchasing decisions. Pet owners want to provide their pets with the same quality of food and care as they provide for themselves.

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• Increasing consumer focus on health & wellness. The Alberta Agriculture and Forestry department's research found Canadian dog food purchasers between the age of 55 and 64 were most likely to purchase both wet foods and specialty nutritional formulas including wheat or grain-free products at an index of 123 and 165 respectively. Those with children aged 6 to 11 years are disproportionately more likely to purchase natural/organic foods. Those with a master's degree are more than twice as likely to purchase specialty nutritional formulas. Consumers with children under the age of twelve were even more likely to buy foods with special health benefits as are those with a master's degree. We believe this is an international trend and not specific to Canada. Consumers world-wide are more conscious about their health and the health of their pets.

All of these factors, we believe, contribute to a growing marketplace for natural products such as TL Pet in the pet food industry.

Our Products

In 2015, we began manufacturing, marketing and selling three dog chew products containing hemp. Hemp and marijuana are different varieties of the same plant species of 'Cannabis Sativa'. Marijuana plants contain high levels of tetrahydrocannabinol ("THC"). Hemp, on the other hand, is non-psychoactive and contains very little THC (less than .3% by law), but certain cultivars contain cannabidiol ("CBD") located primarily in the hemp leaf and the hemp flower. True Leaf uses whole hemp seed and cold-pressed hemp seed oil in the True Hemp™ product line, which does not contain detectable levels of CBD. These are our hemp based dog chew products:

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Each of these products is natural, grain-free, non-GMO Hemp with no artificial colors or flavors. The inactive ingredients in all our chews includes: salmon, buckwheat flour, yellow pea flour, coconut flour, sunflower seed oil, blackstrap molasses, vegetable glycerin, natural fish flavor, citric acid, and mixed tocopherols.

Hemp seed oil - a major component of hemp seed itself and of True Leaf Pet's product line - has a variety of beneficial properties and is showing great promise on its own as a supplement. Because hemp oil is extracted from the industrial hemp plant, it contains no psychoactive reactors. Hemp contains known antioxidants from tocopherols and hosts a variety of other beneficial properties including anti-inflammatory compounds from terpenes, plant sterols and methyl salicylate - a relative of acetylsalicylic acid or 'aspirin'. Hemp oil helps to support the moisture level in a dog's skin and fur. Furthermore, hemp seed oil supports the body's ability to enhance blood circulation, stimulate cognitive thinking, and can help improve fur texture and lessen shedding.

Hemp is rich in essential fatty acids and other polyunsaturated fatty acids. It has almost as much protein as soybean and is also rich in Vitamin E and minerals such as phosphorus, potassium, sodium, magnesium, sulfur, calcium, iron and zinc.^[1] Dietary hempseed is also particularly rich in the omega-6 fatty acid, linoleic acid and also contains high concentrations of the omega-3 fatty acid, alpha-linolenic acid. The linoleic acid: alpha-linolenic acid ratio normally exists in hempseed at between 2:1 and 3:1 levels. This proportion is ideal for a healthy diet.^[2] We believe that our pets should have a healthy diet and therefore we include hemp in all of our pet chews.

Hemp is also legally refined in industrial factories for textile and nutritional use. It is often consumed and mixed into other products including cereal and granola bars. Hemp for dogs is increasing in popularity because of its significant potential health benefits that may include joint support, skin and coat nourishment, and antioxidant support.

We enrich our hemp-based pet products by adding additional quality ingredients such as green lipped mussel, curcuminoids from turmeric, L-theanine, lemon balm, chamomile, polyphenols from pomegranate, and DHA (an omega fatty acid) to create a high-value product that aligns with current consumer demands.

We are currently developing other hemp based pet products which we intend to test and - if suitable - add to our product line. In particular, we intend to launch liquid hip and joint supplements for dogs and cats, as well as functional cat chews and supplements.  The launch of these products is dependent upon favorable market conditions, successful research and development and raising additional capital.

On December 30, 2016, we acquired the assets and intellectual property of OregaPet^TM , a Canadian brand of natural supplement products for pets. The OregaPet^TM , product line includes: oregano first aid drops, oregano first aid gel, dental health mini treats, dental health treats, dental spray, pet toothpaste, ear drops, bed and body spray, shampoo therapy and oil of oregano for pets.

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OregaPet^TM's product line has attracted industry recognition for its quality and innovation. OregaPet^TM Bed and Body Spray has received the 2016 NationalNutrition.ca award for 'Best Pet Product' and OregaPet^TM ; Oil of Oregano received the 2013 Alive® Consumer's Choice Silver Award for 'Best New Product'.

We intend to launch a TL Pet branded product line later in 2017 based on the OregaPet^TM formulations we have acquired.

Manufacturing

We outsource the manufacturing of our products to third parties whose facilities are cGMP compliant. We have a oral contractual relationship with Okanagan Naturals in British Columbia to manufacture our products and expect to add an additional manufacturer located in the United States in 2017. We believe that there are numerous cGMP compliant third party manufacturers who can be secured on a short or long term basis at commercially reasonable costs who are capable of manufacturing our products for us.

[1] Callaway,  J.C.  "Hempseed  as  a  nutritional  resource:  An  overview"  Euphytica  (2004)  140:  65. doi:10.1007/s10681-004-4811-6

[2] Holub, B. J. (2002). Clinical nutrition: 4. Omega-3 fatty acids in cardiovascular care. CMAJ: Canadian Medical Association Journal, 166(5), 608-615.

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We provide our contract manufacturer with our formula and manufacturing specifications for each of our products. The manufacturer then sources and purchases raw ingredients and manufactures the products to our specifications. We believe that the raw materials used in our formulations are readily available from various sources.

Our Business Objectives

TL Pet wants to become known in the natural pet product sector as the company whose product line makes a difference in pets' lives. We want to create brand awareness and loyalty around our innovative hemp-based functional pet products. This will be followed by hemp extract supplements for pets in the USA and European markets. This will lay a profitable foundation for the company's long-term strategy to obtain global market share and build a lucrative brand with a comprehensive product line in the fast-growing natural pet and supplement category. 

The following table sets forth what we have achieved to date:

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Our long - term objectives are:

• Carve a niche in the global pet industry with a hemp-focused family of products that are sold in the pet specialty, mass-pet, veterinary and food/mass/drug market segments.
• Review and assess the feasibility of a new animal drug application for a cannabis-based pet medication sold via veterinary prescription in the pet medication market.

The following disclosure is based upon our ability to raise additional funds which may not be possible if market conditions are not favorable. We may reallocate funds for sound business reasons.

We aim to accomplish the following business objectives in the forthcoming twelve-month period if we raise the full amount we are looking for under this offering:

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Marketing and Sales

Our products are primarily sold through a combination of direct sales and a network of independent distributors who market our products to veterinarians, food retailers, food wholesalers, drug stores, club stores, mass merchandisers, discount and dollar stores, natural foods stores and distributors, and pet specialty stores

We have entered into written and oral agreements with distributors in Canada, the United States, the United Kingdom and Europe. These distributors cover over 9,150 retail points.

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We plan to support these sales efforts through marketing campaigns in both traditional broadcast and online media. This includes radio and television commercials, infomercials, print advertisements, social media, and other online marketing campaigns. The extent to which we will be able to market our products will depend, in large part, on our capital resources.

Marketing Strategy

We intend to generate traffic to our website and interest in our products through the following marketing channels:

(a) content marketing: includes marketing videos, blogs, and white papers;

(b) social marketing: includes the sharing of content on social media and generating more followers on Twitter;

(c) email marketing: includes sending emails to the 1,400 verified subscribers who have opted to receive our marketing emails;

(d) blogger outreach: includes contacting bloggers who have a large social media presence to assess their interest in reviewing our products;

(e) online publications: includes engaging in a variety of digital based advertising campaigns through identified publications to help to create awareness of our brand;

(f)  ecommerce: includes developing our ecommerce website and generating awareness through our newsletters; and

(g) utilizing search engine optimization and pay-per-click marketing.

We also intend to engage in a variety of offline marketing tactics to increase product awareness. Ourprimary marketing channels will be the following:

(a) coordinating a street team who will target dog parks in large urban centers in the USA and Canada to connect with dog owners and give away product samples;

(b) engaging in trade marketing to promote new products and connect with distributors and retailers in the natural pet product sector;

(c) offering retail promotions to retail teams and sales representatives based upon performance; and

(d) engaging the press and media by disseminating press releases at least once per month.

Competition

We are one of many companies in the consumable pet products market with no measurable percentage of that market. Our competition in the healthy feeding systems and healthy consumable products markets are both domestic and foreign companies, many of whom manufacture their products in low cost areas such as India, East Asia, Southeast Asia and Mexico.

We also compete with other smaller niche market companies focused on the same area of the consumable pet product markets we have entered. The following companies offer similar products to our hemp based pet supplement and chews: Pet Naturals of Vermont, Cloud Star Dynamo Dog Functional Dog and Glycoflex II.

We believe that our products provide us with a competitive advantage as we only include hemp in our products and our price point is lower than some of our other competitors. Hemp is an unregulated food substance and, as such, we believe provides with a competitive advantage over our competitors who market products which contain cannabidiol extract from hemp or marijuana. Although marijuana can be grown and sold in certain states, its use, transport and sale in all its forms is heavily regulated.

Raw Materials and Suppliers

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Research and Development

Our product formulations were developed in conjunction with Hannah Facey Belcher-Timme (Doctor of Veterinary Medicine, Candidate, 2016) of Cornell University who reviewed our base formulas and undertook a meta-analysis of

existing research. She has published studies on hemp and the company's proposed active ingredients. The resulting formulations utilize a combination of hemp and other quality ingredients such as green lipped mussel, curcuminoids from turmeric, L-theanine, lemon balm, chamomile, polyphenols from pomegranate, and DHA (an omega fatty acid).

Governmental Regulations

Pet Food-Related Regulation - Canada

In Canada, the labelling and advertising of pet food is regulated by the Consumer Packaging and Labelling Act and the Competition Act, administered by Industry Canada. The Consumer Packaging and Labelling Act mandates that the following items be included on pet food labels: (1) common or generic name: e.g. "dog food" or "cat food"; and (2) net weight: amount of product within the package, measured in metric units; and the manufacturer's or importer's contact information.

The Pet Food Association of Canada ("PFAC") with input from members from the Competition Bureau has also established pet food labeling guidelines. These guidelines are voluntary. The PFAC guidelines recommends pet food labels should include the following items: (1) list of ingredients: listed in descending order by percentage of weight; (2) feeding instructions; and (3) guaranteed analysis: information on the minimum and maximum nutritional quantities. For example, the analysis will include the maximum or minimum percentage of protein, fat, fiber and moisture; and nutritional adequacy or intended life stage for which the food is suitable. They also recommend that ingredients be listed and identified by their common name. When an ingredient or combination of ingredients makes up 90% or more of the total weight of all ingredients, these ingredients should also form a part of the product name. For example, if the product contains 90% or more beef, it may be called "my brand beef dog food".

In Canada, products that pass the Canadian Veterinary Medical Association ("CVMA") Pet Food Certification Program, which involves a feeding trial, carries a CVMA label on their packaging. Participation in the program is voluntary.

Pet Supplement Regulation- Canada

Products sold and marketed as 'pet supplements' in Canada are currently administered by the Canadian Low Risk Veterinary Health Products ("LVRHP") Interim Notification Program. Health Canada considers the current INP (Interim Notification Program) structure to be a temporary measure pending the new veterinary drug framework to improve the regulation of LRVHPs (Low Risk Veterinary Health Products).

The INP allows for LRVHPs to obtain a notification number if certain conditions have been met, the significant ones being:

• The product is for use only in dogs, cats, or horses that are not intended for food.
• All ingredients are listed in and meet the conditions of admissible substances in the 'List of Substances' established by Health Canada.
• There is objective and credible evidence demonstrating that the product is safe and can support a reasonable expectation of effectiveness when the product is used as intended.
• Product labeling information and any other information supplied to the users will match the information provided on the notification form (e.g. health claims) and comply with the conditions of admissible substances (e.g. contraindications, cautions and warnings).

Participation in the INP is voluntary and industry members may instead prefer to obtain a Notice of Compliance (NOC) and Drug Identification Number (DIN) through the normal regulatory process.

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The company is participating in the program, has submitted all product information for registration and is currently awaiting to be assigned its notification numbers for each product.

Pet Food-Related Regulation- United States

In the United States, the Food and Drug Administration's ("FDA") Center for Veterinary Medicine ("CVM"), regulates animal feed - including pet food under the Federal Food, Drug and Cosmetic Act ("FFDCA") and its implementing regulations. Although pet foods are not required to obtain premarket approval from the FDA, any substance that is added to or is expected to become a component of a pet food must be used in accordance with a food additive regulation unless it is generally recognized as safe ("GRAS") under the conditions of its intended use.

The labeling of pet foods is regulated by both the FDA and individual state regulatory authorities. FDA regulations require proper identification of the product, a net quantity statement, a statement of the name and place of business of the manufacturer or distributor and proper listing of all the ingredients in order of predominance by weight. The FDA also considers certain specific claims on pet food labels to be medical claims and therefore subject to prior review and approval by the FDA. In addition, the Food and Drug Administration Amendments Act of 2007 requires the FDA to establish ingredient standards and definitions for pet food, processing standards for pet food and updated labeling standards for pet food that include nutritional and ingredient information. The FDA is currently working to implement these requirements.

The FDA recently noted an increase in the number of dog and cat foods labeled as being intended for use in the diagnosis, cure, mitigation, treatment or prevention of disease and noted that animal health may suffer when such products are not subject to pre-market FDA approval and are provided in the absence of a valid veterinarian-client-patient relationship. The FDA recently issued guidance containing a list of specific factors it will consider in determining whether to initiate enforcement action against products that satisfy the definitions of both an animal food and an animal drug, but which do not comply with the regulatory requirements applicable to animal drugs. These include, among other things, whether the product is only made available through or under the direction of a veterinarian and does not present a known safety risk when used as labeled. We believe that we market our products in compliance with the policy articulated in FDA's guidance and in other claim-specific guidance, but the FDA may disagree or may classify some of our products differently than we do and may impose more stringent regulations applicable to animal drugs, such as requirements for pre-market approval and compliance with GMPs for the manufacturing of pharmaceutical products.

Under Section 423 of the FFDCA, the FDA may require the recall of a pet food product if there is a reasonable probability that the product is adulterated or misbranded and the use of or exposure to the product will cause serious adverse health consequences or death. In addition, pet food manufacturers may voluntarily recall or withdraw their products from the market.

Most states also enforce their own labeling regulations, many of which are based on model definitions and guidelines developed by Association of American Feed Control Officials ("AAFCO"). AAFCO is a voluntary, non-governmental membership association of local, state and federal agencies that are charged with regulation of the sale and distribution of animal feed, including pet foods. The degree of oversight of the implementation of these regulations varies by state, but typically includes a state review and approval of each product label as a condition of sale in that state.

Most states require that pet foods distributed in the state be registered or licensed with the appropriate state regulatory agency.

Facilities that manufacture, process, pack, or hold foods, including pet foods, must register with the FDA and must renew their registration every two years. This includes most foreign facilities as well as domestic facilities. Registration must occur before the facility begins its pet food manufacturing, processing, packing, or holding operations.

We are also subject to the Food Safety Modernization Act ("FSMA"). Under the FSMA, the FDA implemented the Current Good Manufacturing Practice, Hazard Analysis and Risk-Based Preventive Controls for Food. Our manufacturing facilities must company with the Foreign Supplier Verification Program, FSVP, on or before July 2017.

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Pet Supplement Regulation-United States

Some of the company's product line are marketed as dietary supplements for animals, not feed or treats. According to the FDA: 'Dietary supplements for animals are not recognized as a class of products. Under the Federal Food, Drug, and Cosmetic Act, products marketed as dietary supplements for use in animals are classified as either foods or drugs, depending on their intended use.^[3]  

In order to find a pathway to market for its supplement products, the company is a member and complies with the product guidelines of the National Animal Supplement Council (NASC). NASC was formed in 2001 when the animal health supplement industry was threatened to be shut down from a complicated and erratic regulatory environment under the AAFCO and FDA regulatory bodies.

The NASC put together a framework under which companies could market and distribute products, as long as they were 'non-food' and didn't make nutritional claims or references anywhere on the label, website or promotional material. Product claims could only involve how the ingredients impacted the structure or function of the animal, 'joint support' or 'cardiovascular health' are common examples.

Since 2002, AAFCO, the FDA and the NASC have worked together and supported this product category, thus allowing the marketing and sale of animal supplements.

The company follows the NASC member requirements, including implementing standards for good manufacturing practices, participating in the NASC Adverse Event Reporting System and complying with all supplement labeling and claims guidelines.

Medical Marijuana

True Leaf Medicine Inc. ("TL Medicine") began as a "licensed producer" applicant in Canada's Marihuana for Medical Purposes Regulations (MMPR) program. Our original submission was sent in July of 2013. A "ready to build" approval was granted for the first application in January 2014, but issues arose regarding the facility location and local zoning. In March 2014, we secured a new location and submitted another application on April 8, 2014. 

In July 2015, we received a notice from Health Canada stating that our application had passed through the preliminary screening process and was undergoing enhanced screening. Enhanced screening is one of the necessary steps in the process of becoming a licensed producer of medical marijuana under the MMPR.  Shortly thereafter the federal government set the election date for October 19, 2015, the application process under the MMPR stalled.

On August 24, 2016, the federal government adopted the Access to Cannabis for Medical Purposes Regulations ("ACMPR") program to replace the MMPR program. Many applicants have either gone out of business or have declined to continue down the difficult road of obtaining license approval. The team at True Leaf continues to persevere. The company's application is in good standing and is in the review clearance stage.

Industry

Medical Marijuana

As of February 16, 2017, there are 38 licensed producers in Canada, all of which are either producing or intending to produce medical marijuana.

[3] http://www.fda.gov/AnimalVeterinary/Products/AnimalFoodFeeds/ucm050223.htm

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Health Canada estimates that - as of September 30, 2016 - approximately 94,460 patients in Canada used doctor-prescribed medical marijuana through the ACMPR. By 2024, Health Canada estimates that the number of patients using medical marijuana will grow to 450,000 - creating a market worth an estimated $1.3 billion.

Recreational Marijuana

The size of the 'black market' for marijuana is large and difficult to quantify. A report by the Fraser Institute in B.C. estimates the total marijuana market in British Columbia, alone, to be $7 billion.  The "blue sky" growth potential of the recreational market seems inevitable as polls in Canada (56%) and the United States (58%) continue to move toward favoring legalization.  A number of states have already legalized recreational marijuana.

Principal Product

As attitudes and legal treatment on the use of marijuana for medical purposes evolve, we have begun to see a paradigm shift on the issue.  Significant medical breakthroughs for the treatment of cancer, Crohn's disease, multiple sclerosis, glaucoma, chronic pain, arthritis, diabetes and many other possible ailments in the near future could be realized as efficacy is proven under a regulated environment and published scientific studies support the following benefits of medical marijuana: pain relief: studies have shown benefits for sufferers of chronic or neuropathic pain, the latter of which is caused by damage to the nervous system; increases appetite: helps cancer and AIDS sufferers to eat, thereby increasing their ability to combat illness; decreases nausea: enables chemotherapy patients to be more receptive to treatment; and relaxes muscles: in many cases, medical marijuana relieves seizures, muscle twitching, tightness, tension or muscular pain, which improves the patient's quality of life. We anticipate having two core revenue streams: Direct-to-consumer sales of True LeafTM medical marijuana via doctor's prescriptions; and Laboratory testing services to ACMPR suppliers (such testing is now mandated by Health Canada).

As attitudes and legal treatment on the use of marijuana for medical purposes evolve, we have begun to see a paradigm shift on the issue.  Significant medical breakthroughs for the treatment of cancer, Crohn's disease, multiple sclerosis, glaucoma, chronic pain, arthritis, diabetes and many other possible ailments in the near future could be realized as efficacy is proven under a regulated environment and published scientific studies support the following benefits of medical marijuana:

• pain relief: studies have shown benefits for sufferers of chronic or neuropathic pain, the latter of which is caused by damage to the nervous system;
• increases appetite: helps cancer and AIDS sufferers to eat, thereby increasing their ability to combat illness; decreases nausea: enables chemotherapy patients to be more receptive to treatment; and
• relaxes muscles: in many cases, medical marijuana relieves seizures, muscle twitching, tightness, tension or muscular pain, which improves the patient's quality of life.

We anticipate having two core revenue streams:

1. Direct-to-consumer sales of True Leaf^TM medical marijuana via doctor's prescriptions; and
2. Laboratory testing services to ACMPR suppliers (such testing is now mandated by Health Canada).

Operations

In the event that our application to become a licensed producer of medical marijuana (a "licensed producer") is approved, we have the option to lease a 0.61-hectare location with a 16,000-square foot building located in the Village of Lumby, British Columbia on which to carry out our operations. The building complies with building and fire codes and poses no risk to public health, safety or security.  The location has room to expand production to meet up to $72 million in annual sales.  

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Proposed Lumby Property

The proposed 16,000 square foot building contains 40' ceilings, creating the opportunity for a total of three interior floors and 48,000 square feet of useable space.  We also have a right of first refusal to lease an adjacent building with 30,000 square feet, 40' ceilings, and the opportunity for 90,000 square feet of usable space.  Under the ACMPR , if a licensed producer wishes to expand to a second building at the same location, an amendment to the original application will need to be submitted to Health Canada for approval.

Interior Layout

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Operational Security

Sophisticated security measures will be taken to not only insure the physical security of the premises and staff, but also to prevent infiltration by criminal groups seeking to traffic elicit materials. These security measures include:

• perimeter security fence around the property with remote operated central gate;
• third party 24-7 monitoring of site and facility by ULC certified security firm;
•  motion and fire detection for all interior rooms;
• sophisticated intrusion detection;
• access control readers for every room within the facility;
• internally segregated restricted areas with separate access control;
• a Level 8, 'ULC' certified vault with its own security system located within internal restricted area; 
• all individuals working for the company require a clean criminal record; and
• all directors, officers and 'Senior People in Charge' require enhanced security clearance approval from Health Canada.

Building Security

The ACMPR sets out physical security requirements that are necessary for securing sites where licensed producers conduct activities with marijuana other than storage. Health Canada's Directive on Physical Security Requirements for Controlled Substances provides technical detail as to how to meet these security requirements. We will take sophisticated security measures to ensure the physical security of the premises and staff and abide by the regulatory requirements. Such measures include:

• a chain link security fence around the perimeter of the property that will be no less than 1.2 meters from the outside of the building with a remote operated central gate as the only entrance to the facility;
• third-party 24-7 monitoring of the site and facility by an Underwriters Laboratories of Canada (ULC) certified security firm; motion and fire detection for all interior rooms;
• access control readers for every room within the facility;
• internally segregated restricted areas with separate access control; a Level 8 (minimum) ULC certified Vault with its own security system located within internally-restricted areas for inventory: all individuals working for the company will require a clean criminal record; and
• all directors, officers and 'Senior People in Charge' (as defined in the ACMPR) require enhanced security clearance approval from Health Canada.

Building room layout:

• flowering area of 15 rooms @ 672sq ft. and 6 rooms @ 1200sq ft totaling approximately 17280sq. ft. (restricted);
• clipping and curing rooms (restricted); controlled substance waste storage area (restricted); lab(restricted);
• vault area: vault and packaging area (restricted and secured);
• administration, reception, security area (restricted);
• staff welfare area (restricted);
• shipping room (restricted and secured); and
• nutrient storage and water treatment room (restricted). (external building)
• 2000 square foot space allocated for the vault and packaging area.

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The building is of metal frame construction with exterior metal sheeting and cement floors. An estimated budget of $500,000 is needed to install food grade interior cladding, epoxy coat the floors and to construct the ground floor with areas for administration, vault, staff, shipping, nutrient storage and waste storage and grow areas.

Production

The primary specialized skill and knowledge requirement for success as a licensed producer of medicinal marijuana is with respect to cultivating the product. Currently, we have two full-time employees and nine marketing, finance and quality assurance consultants contracted as part of our team. Once we receive funding and pre-licensing approval, a full-time quality assurance person and master grower will be secured to ensure the quality of the production process and that the finished product meets company specifications before it is made available for sale.

 In order to begin production of medical marijuana, we will need to obtain starting materials - namely, seeds - from appropriate sources.

The latest regulations outline only two approved sources of seed material as laid out in this text from Health Canada. There are two potential legal sources of material that can be used for cultivation of marihuana:

• Importation from a legal foreign source;
• Marihuana plants or seeds obtained from a producer who holds a license under the ACMPR.

The same requirements applied under the former Marihuana for Medical Purposes Regulations ('MMPR').

All initial seed stock or "seedlings" will be purchased from approved sources and verified by our quality control team.

Our Business Objectives

We have an option to lease or purchase a 0.61hectare location with a 16,000-square foot building in the Village of Lumby, British Columbia for our operations, with room to expand production.  We project a 12-month period without revenue for Health Canada reviews, pre-licensing approval, building renovations, license approval and cultivation.  Pending Health Canada approval, we expect to be producing and selling product under an ACMPR license by the spring of 2018.

The following table sets forth what we have achieved to date:

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Our long-term business objectives are:

• To achieve commercial distribution of medical marijuana;
• To increase our patient customer base annually through our marketing campaign. We intend to allocate 10% of our sales to marketing;
• As demand for our product grows, we will seek to expand our production capacity by adding growing rooms through the addition of mezzanine floors and increasing the facility's footprint at an estimated cost of $4.68 million (financed from internal or external sources of capital over a six-year period);
• To engage in ongoing research and development at an initial cost of 10% of our sales.

Our short-term business objectives for the next 12 to 24 months are:

• Obtain a producer license;
• Develop brand awareness;
• Pre-enroll 500 patients for our product;
• Cultivate and grow our product; and
• Complete our first harvest and begin sales.

The following table describes how we intend to meet those objectives over the next 12 to 24 months.

* We are unable to estimate certain costs at this date. Once we receive pre-licensing approval from Health Canada we will be in a better position to estimate these various amounts.

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Expected Expenditures to Activate Business

As previously discussed, our medical marijuana production business is on hold pending application approval by Health Canada. Once we have confirmation that our application is once again moving forward, we intend to raise additional capital for this segment of our business.  Upon pre-licensing approval confirmation by Health Canada, we estimate $5,000,000 will be required for the full activation of our marijuana production business. The break-down of expenditures is as follows:

Marketing Plans and Strategy

Licensed producers in Canada are not allowed to advertise their products to the public. On June 30, 2014 Health Canada circulated an advertising bulletin to all licensed producers outlining their concerns regarding the use of promotional materials and advertisements.

Licensed producers are allowed to promote their products to doctors directly and indirectly through various outreach programs and through the attendance at conferences. As a result, our marketing will be focused on aligning ourselves with physicians and family doctors to become the trusted source of medicinal cannabis to the medical community.

We plan to continue to reach out to the medical community and educate the user market in order to build brand awareness and engagement through our attendance at conferences and other outreach strategies.   Our goal is to have 500 physician-supported patients pre-enrolled in the True Leaf distribution system when we are finally able to launch our production products.

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Competition

Marijuana Industry

The company has applied for a "licensed producer status" under the ACMPR in Canada. As of May 15, 2017, there are 43 licensed producers in Canada each producing or intending to produce medical marijuana. They are as follows:

List of Authorized Licensed Producers⁽¹⁾

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Notes:

(1)      The list of current licensed producers is available on the Health Canada website at: http://www.hc-sc.gc.ca/dhp-mps/marihuana/info/list-eng.php

A number of other entities have applications pending, or will seek to obtain licensed producer status under the ACMPR. There are also a number of existing growers of medical marijuana operating under the prior regulatory regime who have or will seek to obtain licensed producer status under the ACMPR.

The company believes that the stringent application and compliance requirements of the ACMPR may prove too onerous for some of those existing producers.

In addition, due to the Federal Court of Canada order described below, existing growers of medical marijuana operating under the MMAR may continue to produce medical marijuana pursuant to their licenses provided they meet the requirements of the court order. How long this situation will continue depends on the ACMPR and any new regulations the Government of Canada may decide to include at the six-month deadline.

As of March 31, 2017, Health Canada has received 1630 applications. 265 of those applications have been refused, 414 applications are in progress, 69 have been withdrawn, and 841 were incomplete or have been returned.

The differentiators between competitors are expected to be price, quality (smell/taste/appearance), organic purity (zero additive, pesticide, mold treatment or anti-biological) and production process. The cost of growing an inexpensive strain (i.e. mass market) is identical to growing premium strains and the crop risks are identical (disease, pests and infrastructure failure). The majority of firms with listed product often overlap in strains and strengths (THC/CBD).

Research and Development

We expect to engage and align ourselves with a reputable research and development testing facility in order to conduct pre-clinical trials, advocacy work, and specific strain research and development.

We will actively publish relevant scientific and industry data through social media streams and search marketing platforms as part of our ongoing marketing efforts.

Pre-License Stage

Prior to License approval, we intend to contract for research and development in order to isolate the appropriate strains of marijuana designed to address specific ailments or conditions.  We will source these strains or plant material from approved Canadian or imported sources. 

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A key part of our production plan is to develop strains of marijuana that are designed to treat particular ailments so that our product is tailored to treat a patient's needs as specifically and effectively as possible.  Different strains of medical marijuana will have a different effect on the patient, and we believe that it is extremely important that each patient should be matched with an appropriate and effective product for their needs.  

Testing

We intend to outsource all testing to Experchem Laboratories Inc., a Canadian subsidiary of Experchem Scientific. The decision to outsource was based on Experchem proven ability to:

• perform fast and accurate testing for all microbial and chemical contaminants required under MMPR;
• accurately measure THC and CBD levels of all plant material during the research and development and production process; and
• provide cash flow from third party testing services to other licensed producers or research and development facilities, should the need arise in the future.

Governmental Regulations

Medical Marijuana Regulatory Framework in Canada

In 2001, Canada became the second country in the world to recognize the medicinal benefits of marijuana and to implement a government-run program for medical marijuana access through the Marihuana Medical Access Regulations ("MMAR"). The MMAR enabled individuals - with the authorization of their health care practitioner - to access dried marijuana for medical purposes by producing their own marijuana plants, designating someone to produce for them or purchasing Health Canada supply.

Health Canada replaced the MMAR and issued the MMPR in June 2013 which was intended to replace government supply and home-grown medical marijuana with secure and regulated commercial operations capable of producing consistent quality medicine. The MMPR regulations issued in June 2013 covered the production and sale of dried cannabis flowers only.

In June of 2015, the Supreme Court of Canada ruled with R v. Owen Edward Smith that the MMPR`s restricting legal access to only dried marijuana was unconstitutional as it infringed on the rights to liberty and security of the person under section 7 of the Charter. Up until this time, only the dry form of marijuana could be produced or possessed for medical purposes.

On July 8, 2015, Health Canada issued certain exemptions under the Controlled Drugs and Substances Act (Canada) which includes a Section 56 Class Exemption for licensed producers under the MMPR to conduct activities with cannabis. It permits licensed producers to apply for a supplemental license to produce and sell cannabis oil and fresh marijuana buds and leaves in addition to dried marijuana (this does not permit licensed producers to sell plant material that can be used to propagate marijuana).

On February 24, 2016, the Federal Court of Canada released its decision in the case of Allard et al v. Canada. This case began as a result of the government's decision to repeal the MMAR and enact the MMPR. This change overhauled the way that the government provides access to medical marijuana for patients across the country. The plaintiffs in the Allard case argued that the MMPR violates their Charter rights. The court, in a lengthy and detailed judgment, agreed with the plaintiffs and found the entire MMPR to be unconstitutional and of no force or effect. However, the court suspended its declaration of invalidity for six months in order to give the government time to respond and, if thought appropriate, craft a Charter compliant medical marijuana regime.

On August 24, 2016, the Access to Cannabis for Medical Purposes Regulations ("ACMPR") replaced the MMPR. The ACMPR includes a similar framework to the MMPR for commercial production by licensed producers responsible for the production and distribution of quality-controlled fresh or dried marijuana, cannabis oil, or starting materials (i.e., marijuana seeds and plants) in secure and sanitary conditions.  It also provides provisions similar to the former MMAR setting out the rights and requirements for individuals to produce a limited amount of cannabis for their own medical purposes or to designate someone to produce it for them.

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Under the ACMPR, Health Canada continues to accept and process applications to become a licensed producer that were submitted under the former MMPR. Furthermore, all licences and security clearances granted under the MMPR were continued under the ACMPR. This means that licensed producers can continue to register and supply clients with cannabis for medical purposes. New applicants are required to apply for licences to produce under the ACMPR.

Legalization of Recreational Use of Marijuana in Canada

On April 13, 2017, the Canadian federal government introduced the Cannabis Act a bill to legalize the recreational use of marijuana in Canada. This bill must go through a number of stages and be passed by the House of Commons and Senate before it is given Royal Asset and becomes law. The new rule allows Canadians to possess up to 30 g of dried cannabis and grow up to four plants per household for their personal use. Canadians may also purchase cannabis and derivatives from licensed producers through authorized sellers. The bill authorizes provinces to determine who may possess, sell or distribute cannabis for the purpose of sale. Only parties licensed under the Cannabis Act may produce cannabis for commercial purposes.

The import and export of cannabis and cannabis products may only be conducted with a valid permit. Permits may be issued for certain purposes such as medical and scientific purposes, or with respect to industrial hemp. An application for license or permit remains with the Minister of Health Canada in the form and manner specified by the Minister.

Under the proposed bill, provinces, territories and municipalities may adopt rules for their own jurisdictions. These rules may include raising the age limit to use and access products, licensing, distribution, zoning, and limitations on retail and other cannabis businesses as well as taxation.

CIBC World Markets reports estimates of the potential value of the recreational marijuana market in Canada will range from $5 billion to $10 billion per year. The lower market value of $5 billion per year translates into an annual consumption of 770,000 kilograms of marijuana (assuming a price of approximately $6.50 per gram). To put the potential size of the Canadian recreational market into context, Statistics Canada valued the beer market in Canada in 2014 at $8.7 billion.

ACMPR Requirements for License Applicants

Under the ACMPR, a business that wishes to commercially produce and/or distribute medical marijuana must obtain a license to operate as a licensed producer. In order to obtain such a license, the applicant must:

• show that they are an adult who ordinarily resides in Canada or a corporation that has its head office in Canada or operates a branch office in Canada and whose officers and directors are all adults;
• designate one senior person in charge of overall management of the activities carried out by the licensed producer;
• designate one responsible person in charge to work at the licensed producer's site and have responsibility for supervising regulatory compliance of the licensed producer's activities;
• submit details around the identity of the person or company applying for the license as well as the location and contact information for each proposed production site and each building within the site if applicable;
• submit the proposed activities to be conducted at each site, the purpose of the proposed activities, and the substance(s) in respect to which the activities are to be conducted;
• submit a detailed description of the security measures at the proposed site;
• submit a detailed description of the proposed record-keeping method;
• submit the maximum quantity of dried marijuana to be produced under the license and the production period;
• submit the maximum quantity of dried marijuana to be sold or provided by the applicant under the license;
• submit a report written by a quality assurance person establishing that the buildings, equipment and sanitation program to be used in the license activities complies with the ACMPR's Good Production Practices requirements; and
• gain security clearance for the senior person in charge, the responsible person in charge, the individual licensee if the license is issued to an individual and each officer and director of the corporation licensee if the license is issued to a corporation.

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Considering that our quality assurance report, operating and recordkeeping procedures have been reviewed and received an earlier Health Canada approval, we hope to receive a pre-licensing approval of the new application in 2017. Pending this approval and the execution of our business plan, we expect to be testing and producing product under an ACMPR license six months after receiving this approval.

In April 2017, we completed enhanced screening by Health Canada. It is still possible that Health Canada may reject our application for any number of reasons. Pursuant to paragraph 36(1)(h) of the ACMPR, a producer's license must be refused by Health Canada where the license would likely create a risk to the public health, safety or security, including the risk of cannabis being diverted to an illicit market or use. 

Prior to submitting an application for a Producer's License under the ACMPR, the applicant must provide written notice to the local government, the local fire authority and the local police force or the Royal Canadian Mounted Police in the area in which the production site is located. 

A Producer's License is valid for the period indicated on that particular license, which is determined by the issuing Minister at the time of issuance and must not be later than three years after the effective date of the license. Prior to the expiry date of a license the Licensee who wishes to renew their license must submit an application for renewal to Health Canada. The application must contain the original license and a declaration that all of the information shown on the license is correct and complete subsequent to which the Minister must issue a renewed license subject to any of the grounds for refusal in section 36. 

A licensed producer may engage in the following activities:

• possessing, producing, selling, providing, shipping, delivering, transporting and destroying marijuana;
• possessing and producing cannabis (other than marijuana) solely for the purpose of conducting in vitro testing that is necessary to determine the percentages of cannabinoids in dried marijuana; 
• selling, providing, shipping, delivering, transporting, and destroying cannabis (other than marijuana) that was obtained or produced solely for the purpose of conducting the aforementioned in vitro testing;
• shipping dried marijuana to a health care practitioner as referred to in the ACMPR;
• importing marijuana in accordance with an import permit issued under section 95 of the ACMPR; and;
• possessing and exporting marijuana in accordance with an export permit issued under s. 103 of the ACMPR.

A licensed producer may sell or provide marijuana and cannabis that was obtained or produced solely for the purpose of conducting the aforementioned in vitro testing to:

• another licensed producer;
• a Licensed Dealer;
• the Minister; or
• a person to whom an exemption relating to the substance has been granted under section 56 of the Controlled Drugs and Substances Act ("CDSA").

A licensed producer may sell or provide dried marijuana to:

• a client of that Producer or an individual who is responsible for the client;
• a hospital employee, if the purpose of their possession of the dried marijuana is in connection with their employment; or
• a person to whom an exemption relating to the dried marijuana has been granted under section 56 of the CDSA.

The ACMPR allows doctors or nurse practitioners to write a one-page prescription for up to a year's supply of dried medical marijuana with a maximum shipment size of 150 grams per month. All approved licensed producers are listed on a Health Canada website for doctor referral. Patients send the original prescription to their preferred supplier who then ships product directly to them or their doctor for pick-up. The ACMPR essentially allows a free market, direct-to-consumer, mail-order distribution model with no retail sales permitted.

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Employees

We have five employees and engaged nine consultants.

Intellectual Property

Trademarks. Our products are marketed under a number of trademarks owned or licensed by us or one of our subsidiaries. Our major trademarks are listed below.

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Legal Proceedings

We are not currently a party to any legal proceedings. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.

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DESCRIPTION OF PROPERTY

Our principal office is in Canada - located at 100 Kalamalka Lake Road, Unit 32, Vernon, British Columbia, V1T 9G1. The building consists of approximately 3,896 square feet of office and warehouse space. It is currently being leased to us by our Chief Executive Officer, Darcy Bomford, for $2,500 per month, plus applicable sales taxes. The lease expires on March 31, 2017. The lease does not contain any provisions with respect to renewal, but the current intention of the parties is for the lease to be renewed prior to its expiry. The lease is in good standing.

On March 27, 2014, we entered into an option to lease a property and building in Lumby, BC on which we propose to conduct our medical marijuana operations. We expect to enter into a formal lease with the property owner, but there is a risk that the owner may exercise its right to cancel the option to lease in accordance with the terms of the option. If the option were cancelled, we would need to secure another location.

We believe that, if necessary, we could relocate from the foregoing premises at this time without material harm to our operations.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

The following discussion of our financial condition and results of operations should be read together with the audited financial statements for the period ended March 31, 2016 and the unaudited financial statements for the nine-month period ended December 31, 2016 and related notes. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors. We prepare our financial statements in conformity with international financial reporting standards ("IFRS"). Our management is responsible for our financial statements and this discussion of our financial condition and results of operations.

All amounts are in Canadian dollars except where otherwise indicated.

Overview

We were incorporated on June 9, 2014 under the Business Corporations Act (British Columbia) ("BCA") and have three wholly-owned subsidiaries, being True Leaf Investments Corp. ("TL Investments"), which was incorporated on March 26, 2014 under the BCA and True Leaf Medicine Inc. ("TL Medicine"), which was incorporated on July 4, 2013 under the BCA and True Leaf Pet Inc. ("TL Pet"), which was incorporated on November 18, 2015 under the BCA.

On May 23, 2014, TL Investments completed a share exchange agreement with TL Medicine in which TL Investments issued 25,000,000 common shares valued at $1,250,000 for all of the outstanding common shares of TL Medicine. The Share Exchange Agreement constituted a reverse takeover, with the sole shareholder of TL Medicine acquiring a control position in TL Investments.

On February 2, 2015, we executed a "plan of arrangement" as defined under the BCA. The plan of arrangement constituted a reverse takeover, with the shareholders of TL Investments acquiring a control position in the company. As a result of the plan of arrangement, the consolidated financial statements have been presented as a continuation of TL Medicine. On February 9, 2015, we began trading on the Canadian Securities Exchange under the symbol "MJ".

We are seeking through our subsidiary TL Medicine to become a licensed producer of medical marijuana under Access to Cannabis for Medical Purposes Regulations ("ACMPR") program administered by Health Canada. The ACMPR has replaced the Marihuana for Medical Purposes Regulations ("MMPR") which is the legislation under which we previously submitted our application to Health Canada.

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As of May 15, 2017, we do not have a license under the ACMPR, and none of our products are in commercial production or use. We will be required to satisfy additional obligations in order to qualify including the completion of a compliant facility on a parcel of leased land in Lumby, British Columbia.  There is a significant risk that we will not receive an ACMPR license, thus rendering us unable to proceed with our business model. We continue to work diligently to comply with all of the requirements of Health Canada.

While we are awaiting approval of our license application from Health Canada, we are focused on our new business with hemp-based nutrition for pets. TL Pet has entered the Canadian, American and European natural pet product market with a product line consisting of hemp-based functional chews and supplemental products for pets.  Our initial products were launched in 2015. We have since expanded the jurisdictions in which we are selling our products and have added OregaPet^TM products as of December 30, 2016.

Results of Operations for the Years Ended March 31, 2016 and March 31, 2015

We incurred a net and comprehensive loss of $1,039,320 for the year ended March 31, 2016 compared to a net and comprehensive loss of $2,166,805 for the year ended March 31, 2015.

Some of the items comprising the loss for the year ended March 31, 2016 were accounting and legal fees of $158,899 (2015 - $315,742), consulting fees of $142,848 (2015 - $164,880), and administrative and office expenses of $181,641 (2015 - $145,907).

Results of Operations for the Three-Months ended March 31, 2016 and March 31, 2015

We incurred a net and comprehensive loss of $249,328 for the three months ended March 31, 2016 compared to a net and comprehensive loss of $236,089 for the three months ended March 31, 2015.

Some of the items comprising the loss for the three months ended March 31, 2016 were accounting and legal fees of $59,906 (2015 - $31,868) and consulting fees of $66,110 (2015 - $41,637).

We increased sales by 52% to $17,268 from the previous quarter - a direct result of additional sales to our Canadian distributors.

Our product inventory increased by $21,578 to service immediate future sales to the US and Canada.

Results of Operations for the Nine Months Ended December 31, 2016 and December 31, 2015

We incurred a net and comprehensive loss of $1,371,718 for the nine-month period ended December 31, 2016 compared to a net and comprehensive loss of $795,026 for the nine months' period ended December 31, 2015.

Some of the items comprising the loss for the nine months' period ended December 31, 2016 were accounting and legal fees of $196,398 (2015 $106,622), consulting fees of $202,424 (2015 - $132,597), advertising and marketing costs of $338,310 (2015 $168,068), and research costs of $58,833 (2015 - $8,022).

We increased sales by 100% to $144,390 from the previous quarter, a direct result of additional sales to our Canadian distributors and launched the product to new US and European distributors.

Closing of a private placement of which the company has raised $737,982 in the first quarter and 416, 650 in the third quarter of 2016 and warrant and stock options exercised in the nine month period ended December 31, 2016 increased the ending cash position to $262,866 (2015 $90,830) and decreased the current liabilities to $277,452 from (2015 - $619,055).

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We completed a debt settlement for the convertible note of $63,193 (2015 - $nil) and settled aggregated debt totaling $282,842 (2015 $5,000) during the nine month period ended December 31, 2016.

Gross margins for the nine month period ending December 31, 2016 are still lower than expected and associated with increased promotional and R&D costs attributed to the start-up sales phase for the hemp-based functional chews and supplemental products.

Liquidity and Capital Resources

As at December 31, 2016, we had cash of $262,866 and working capital of $464,028. Our operations during the nine-month period ended December 31, 2016 was funded by two private placements carried out during this period, exercise of warrants and stock options as described below.

Our current business expenses average approximately $135,000 per month, excluding capital expenditures specific to new product launches.  Currently, we do not have enough cash on hand to sustain our business operations and, alongside expected revenue, we expect to access external capital resources in the near future.

Our independent auditors have expressed the existence of a material uncertainty that may cast significant doubt about our ability to continue as a going concern, we feel that our revenue potential is sufficient for our business to continue as a going concern. Our efforts are focused on increasing revenue while we explore external funding alternatives as our current cash is insufficient to fund operations for the next 12 months.

Subsequent Events

We completed the following share transactions since December 31, 2016:

On December 12, 2016, the Company granted a total of 2,799,995 stock options, 1,642,875 options of which were to directors and officers of the Company having a fair value of $184,443.

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Plan of Operations

Our short-term business objectives for the next 12 months are:

1. Successfully complete up to a $5 million private placement which will be used to develop line extensions and increase market share of our pet products in the Canadian, American and European markets .
2. Enter the US and European natural pet product market with a product line consisting of innovative hemp-based functional chews and supplemental products for pets.
3. (Conditional to Health Canada pre-licensing inspection approval,) complete a $2,500,000 financing for construction of production facilities, grow two crops, and obtain approval from Health Canada to be a licensed producer of medical marijuana.

The company's long-term business objectives are:

1.       For the natural pet market:

a.   Carve a niche in the global pet industry with a hemp-focused family of products that are sold in the pet specialty, mass-pet, veterinary, and food/mass/drug market segments.

b.   Review and assess the feasibility of a new animal drug application for a cannabis-based pet medication sold via veterinary prescription in the pet medication market.

2.       For medical marijuana:

a.       Achieve commercial distribution of medical marijuana.

b.       Increase our patient customer base annually through our marketing campaign.

c.        As demand for the product increases, seek to expand production capacity and increase expenditures on research and development.

Trends in Cash Flow, Capital Expenditures and Operating Expenses

We have only recently launched our pet line (in 2015). As a result, we have generated limited revenue from our operations.

We will need to raise additional capital if we are to continue as a going concern. Our inability to raise additional capital in the future will limit or eliminate our ability to implement any business strategy whatsoever. Future debt financings, if available, may result in increased interest expense, increased amortization expense, decreased leverage, and decreased income available to fund further acquisitions or expansion. It may also limit our ability to withstand competitive pressures and render us more vulnerable to economic downturns. Future equity financing may dilute the equity interest of our existing shareholders.

We expect to see a net increase in capital expenditures over the next twelve months as we further activate our business plan. We plan to fund approximately $2 million to $5 million in capital expenditures through the offering above and offerings of our securities outside of the United States.

Related Party Transactions

During the nine-month period ended December 31, 2016, the company:

1. Paid or accrued a total of $45,000 (2015 - $45,000) to Darcy Bomford, Chief Executive Officer for management fees;
2. Paid or accrued a total of $18,000 (2015 - $18,000) to Chuck Austin, Chief Financial Officer for accounting fees; and
3. Paid or accrued a total of $5,625 (2015 - $5,625) in directors' fees to its three independent Directors.

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As at December 31, 2016, the company is indebted to its Chief Executive Officer in the amount of $6,883 (March 31, 2016 $nil) and is indebted as of December 31, 2016 in the amount of $nil (March 31, 2016 $143,648) for management fees and expenses paid on the company's behalf, its Chief Financial Officer in the amount of $nil (March 31, 2016 $14,000) for accounting fees and expenses paid on the Company's behalf and $5,625 (March 31, 2016 $12,060) in director's fees and expense reimbursement to the company's other directors. The amounts are unsecured, non-interest bearing with no scheduled terms of repayment.

On March 19, 2015, the company granted a total of 3,750,000 stock options, 2,000,000 of which were to directors and officers of the company having a fair value of $121,653. During the nine month period ended December 31, 2016, the company recognized $nil (2015 $205,846) in share-based compensation expense associated with the stock options granted to related parties.

On December 12, 2016, the company granted a total of 2,799,995 stock options, 1,642,875 options of which were to directors and officers of the company having a fair value of $184,443.

On March 19, 2015, we granted a total of 3,750,000 stock options, 2,000,000 of which were to our directors and officers having a fair value of $121,653. During the six-month period ended September 30, 2016, we recognized $nil (2015 - $109,784) in share-based compensation expense associated with our stock options granted to related parties.

Going Concern

The consolidated financial statements were prepared on a going concern basis, which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. For the nine month period ended December 31, 2016, the Company incurred a loss of $1,371,718 and has earned revenues of $272,276. The continued operations of the Company are dependent on its ability to generate future cash flows, or obtain additional funding through private placement financings. Management is of the opinion that it does not have sufficient working capital to fund future operations and will require external financing. There is a risk that financing will not be available on a timely basis or on terms acceptable to the Company. These material uncertainties may cast significant doubt on the Company's ability to continue as a going concern.

The consolidated financial statements do not give effect to any adjustments which would be necessary should the company be unable to continue as a going concern and, therefore, be required to realize its assets and discharge its liabilities in other than the normal course of business and at amounts different from those reflected in the accompanying financial statements.

Off Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Critical Accounting Policies and Estimates

General

Our condensed consolidated interim financial statements have been prepared using accounting policies consistent with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and interpretations of the International Financial Reporting Interpretations Committee ("IFRIC"), including International Accounting Standard 34, Interim Financial Reporting ("IAS 34").

Principles of Consolidation

These consolidated financial statements incorporate the financial statements of the company and its controlled subsidiaries. Control exists when the company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The consolidated financial statements include the accounts of the company and its direct wholly-owned Canadian subsidiaries: TL Investments, TL Medicine and TL Pet. All significant intercompany transactions and balances have been eliminated on consolidation.

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Cash and cash equivalents

Cash and cash equivalents include cash on hand, bank deposits, and short-term, highly liquid investments that are readily convertible to known amounts of cash and/or with original maturities of three months or less. As of December 31, 2016, and March 31, 2016, the company did not hold any cash equivalents.

Income taxes

Income tax expense consists of current and deferred tax expense.  Income tax expense is recognized in the statement of comprehensive loss.  Current tax expense is the expected tax payable on the taxable income for the period using tax rates enacted or substantively enacted at period end, adjusted for amendments to tax payable with regards to previous periods.

Deferred tax assets and liabilities are recognized for deferred tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.  

Deferred tax assets and liabilities are measured using the enacted or substantively enacted tax rates expected to apply when the asset is realized or the liability settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that substantive enactment occurs. A deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available against which the asset can be utilized.  To the extent that we do not consider it probable that a deferred tax asset will be recovered, the deferred tax asset is reduced.

Revenue Recognition

Revenue is measured at the fair value of the consideration received or receivable.  We recognize revenue when the risks and rewards of ownership have been transferred to the buyer, the amount of revenue can be measured reliably and it is probable that future economic benefits will flow to the entity. We do not sell any of our current products on a consignment basis.

Inventories 

Inventories include finished goods and supplies in respect to hemp-based nutrition for pets. The classification of inventories is determined by the stage in the manufacturing process. Finished goods inventories are valued based on the lower of actual production costs incurred or estimated net realizable value. Production costs include all direct manufacturing costs, freight, labor and other. Supplies are valued at the lower of average cost or net realizable value. If carrying value exceeds net realizable amount, a write-down is recognized. The write-down may be reversed in a subsequent period if the circumstances which caused it no longer exist.

Capital assets

Capital assets are carried at cost, less accumulated depreciation and accumulated impairment losses. Depreciation is recognized using the straight-line method at the following rates:

• Office equipment - 5 years
• Leasehold Improvement - 3 years
• Website costs - 3 years 

Costs incurred toward the construction of a research facility on the company's leased land will be deferred and capitalized until the facility is considered substantially complete and ready for use.

Our capital assets are reviewed for an indication of impairment at the end of each reporting period. If an indication of impairment exists, the asset's recoverable amount is estimated. Impairment losses are recognized in profit or loss. An impairment loss is reversed if there is an indication that there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of amortization, if no impairment loss had been recognized.

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Intangible asset

The company owns an intangible asset consisting of costs associated with the acquisition of a trademark.

Intangible assets are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses. Subsequent expenditures are capitalized only when they increase the future economic benefits embodied in the specific asset to which they relate. All other expenditures are recognized in profit or loss as incurred. The company does not hold any intangible assets with indefinite lives.

Share capital

Common shares are classified as equity. Transaction costs directly attributable to the issue of common shares, warrants and stock options are recognized as a deduction from equity, net of any tax effects. Common shares issued for consideration other than cash are valued based on their market value at the date the shares are issued. 

We have adopted a residual value method with respect to the measurement of shares and warrants issued as private placement units. The residual value method first allocates value to the more easily measurable component based on fair value and then the residual value, if any, to the less easily measurable component. We consider the fair value of common shares issued in the private placements to be the more easily measurable component and the common shares are valued at their estimated fair value. The balance, if any, is allocated to the attached warrants. Any fair value attributed to the warrants is recorded as reserves.

Share-based payments

The company has a stock option plan that provides for the granting of options to Officers, Directors, related company employees and consultants to acquire shares of the company.  The fair value of the options is measured on grant date and is recognized as an expense with a corresponding increase in reserves as the options vest.   

Options granted to employees and others providing similar services are measured at grant date at the fair value of the instruments issued.  Fair value is determined using the Black-Scholes option pricing model taking into account the terms and conditions upon which the options were granted.  The amount recognized as an expense is adjusted to reflect the actual number of share options that are expected to vest.   Each tranche in an award with graded vesting is considered a separate grant with a different vesting date and fair value. Each grant is accounted for on that basis.

Options granted to non-employees are measured at the fair value of the goods or services received, unless their fair value cannot be estimated reliably, in which case the fair value of the equity instruments issued is used.  The value of the goods or services is recorded at the earlier of the vesting date or the date the goods or services are received. 

On vesting, share-based payments are recorded as an operating expense and as reserves.  When options are exercised, the consideration received is recorded as share capital.  In addition, the related share-based payments originally recorded as reserves are transferred to share capital.  When an option is cancelled or expires, the initial recorded value is reversed and charged to reserves.

Financial Instruments

Financial instruments consist of financial assets and financial liabilities and are initially recognized at fair value net of transaction costs, if applicable. Measurement in subsequent periods depends on whether the financial instrument has been classified as "fair value through profit or loss," "loans and receivables," "available-for-sale," "held-to-maturity," or "financial liabilities measured at amortized cost" as follows:

Financial assets

Financial assets classified as fair value through profit or loss are measured at fair value with unrealized gains and losses recognized in net loss for the period in which such gains or losses occur. The company's cash and marketable securities are classified as fair value through profit or loss.

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Financial assets classified as loans and receivables and held-to-maturity are measured at amortized cost using the effective interest rate method. Under this method, all cash flows from these instruments are discounted, where material, to their present value. Over time, this present value is accreted to the future value of remaining cash flows, and this accretion is recorded as interest income. The company does not hold any financial assets that are classified as loans and receivables and no financial assets have been classified as held-to-maturity.

Financial assets classified as available-for-sale are measured at fair value with unrealized gains and losses recognized in other comprehensive income except for losses in value that are considered other than temporary. Upon disposal of an available-for-sale financial asset, any accumulated other comprehensive income or loss at the time of disposal is recognized in profit or loss. The company does not hold any financial assets that have been classified as available-for-sale by the company.

Transaction costs associated with fair value through profit or loss financial assets are expensed as incurred, while transaction costs associated with all other financial assets are included in the initial carrying amount of the asset.

The company assesses, at each reporting date, whether there is objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset and that event has an impact on the estimated future cash flows of the financial asset or group of financial assets.

Financial liabilities

Financial liabilities classified as other financial liabilities are initially recognized at fair value less directly attributable transaction costs. After initial recognition, other financial liabilities are subsequently measured at amortized cost using the effective interest rate method. The effective interest rate method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period. Our accounts payable and accrued liabilities and any amounts due to related parties are classified as other financial liabilities.

Earnings (loss) per share

We present basic and diluted earnings (loss) per share ("EPS") data for our common shares, calculated by dividing the profit or loss attributable to our equity shareholders by the weighted average number of common shares issued and outstanding during the period.  Diluted EPS is calculated by adjusting the profit or loss attributable to equity shareholders and the weighted average number of common shares outstanding for the effects of all potentially dilutive common shares.  The calculation of diluted EPS assumes that the proceeds to be received on the exercise of dilutive stock options and warrants are used to repurchase common shares at the average market price during the period.  For the periods presented, the calculation proved to be anti-dilutive as we were in a loss position.

Recently issued accounting pronouncements

During the nine-month period ended December 31, 2016, there were no new IFRS or IAS accounting standards that became effective that had a material impact on the company's consolidated financial statements. There are however a number of new standards and amendments to existing standards effective in future periods.

The following may impact the reporting and disclosures of the company:

• New standard IFRS 9 "Financial Instruments" This new standard is a partial replacement of IAS 39

Financial Instruments: Recognition and Measurement. This new standard is tentatively effective for annual periods beginning on or after January 1, 2018.

The company has not early adopted the amended and new standards and is currently assessing the impact that these standards will have on its consolidated financial statements.

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Notes:

(1)  The business address for each of our directors and officers is: 100 Kalamalka Lake Road, Unit 32, Vernon, British Columbia V1T 9G1.

(2)  The number of common shares beneficially owned, or controlled or directed, directly or indirectly, at the date of this offering circular is based upon information furnished to us by the individual directors.

(3)  Our directors and officers as a group held 27,053,794 of our common shares or 45.79%.

(4)  Mr. Bomford's securities are subject to a stock restriction agreement dated February 2, 2015, entered into at the time we listed on the CSE. As of May 15, 2017, 6,085,336 common shares remain in escrow. On August 15, 2017 and February 15, 2018, an additional 3,651,202 common shares will be released from escrow.

(5)  The 1,363,747 common shares held indirectly by Mr. Bomford are held in the name of First Pacific Enterprises Inc.

(6)  These stock options expire on December 12, 2018. These stock options can be exercised to acquire one additional common share at $0.185 per share.

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(7)  300,921 warrants can be exercised to acquire one additional common share at an exercise price of $0.15 prior to May 12, 2018 and are held in the name of First Pacific Enterprises Inc.

(8)  Mr. Ausitin's securities are subject to a stock restriction agreement dated February 2, 2015, entered into at the time we listed on the CSE. As of May 15, 2017, 112,500 common shares remain in escrow. On August 15, 2017 and February 15, 2018, an additional 37,500 common shares will be released from escrow.

(9)  Includes 9,341,347 common shares held by Darcy Bomford. Other than Mr. Bomford, management is unaware of the beneficial holders of the shares registered in the name of CDS & Co., a depositary trust company. CDS& Co has several offices in Canada including: 650 West Georgia Street, Suite 2700, Vancouver, BC, V6B 4N9.

(10)  992,475 warrants can be exercised to acquire one additional common share at an exercise price of $0.15 prior to January 18, 2018 and 523,923 warrants can be exercised to acquire one additional common share at an exercise price of $0.15 prior to August 11, 2017.

INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS

To the best of our knowledge other than as set forth below, since the date of the company's formation on June 9, 2014, there were no material transactions or series of similar transactions nor were there any currently proposed transactions or series of similar transactions to which we were or are to be a party to in which the amount involved exceeds the lesser of $120,000 or one percent of the average of our assets at year end for the last two completed fiscal years. To the best of our knowledge, there have been no transactions in which any director, executive officer, or security holder is known by us to own of record or beneficially more than 5% of any class of our common shares or any member of the immediate family of any of the foregoing persons has an interest (other than compensation to our officers and directors in the ordinary course of business).

Management Agreements

On May 1, 2014, we entered into an executive management agreement with our Chief Executive Officer, Darcy Bomford. The terms of the agreement are as described above under "Compensation of Directors and Executive Officers - Management Agreements".

On June 20, 2014, we entered into an executive consulting agreement with our Chief Financial Officer, Chuck Austin. The terms of the agreement are as described above under "Compensation of Directors and Executive Officers - Management Agreements".

Lease Agreement

On April 1, 2015, we entered into a lease agreement with our Chief Executive Officer, Darcy Bomford. The terms of the agreement are described above under "Description of Property".

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SECURITIES BEING OFFERED

General

The company is offering up to 14,285,715 common shares.

Our authorized share capital consists of an unlimited number of common shares without par value and an unlimited number of preferred shares without par value. As of May 15, 2017, 60,427,383 common shares and no preferred shares were issued and outstanding, 3,399,995 common shares were issuable upon exercise of outstanding stock options, and 1,816,398 common shares were issuable upon exercise of warrants.

The following description summarizes the most important terms of the company's capital stock. This summary does not purport to be complete and is qualified in its entirety by the provisions of True Leaf's constating documents. Copies of these provisions have been filed as exhibits to the offering statement of which this offering circular is a part. For a complete description of True Leaf's common shares and preferred shares, you should refer to our notice of articles and to the applicable provisions of the BCA.

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Common Shares

Dividend Rights

"Holders of common shares are entitled to share - on a per share basis - in dividends and other distributions of cash, property, or shares of stock of the company as may be declared by the board of directors with respect to the common share out of assets or funds of the company legally available to pay dividends; provided, however, that In the event that such dividends are paid in the form of common shares or rights to acquire common shares, the holders of common shares shall receive common shares or rights to acquire common shares, as the case may be.

Voting Rights

Each holder of our common share is entitled to receive notice of any meeting of the shareholders of the company, to attend such a meeting, and to vote at the meeting. Each common share holds one vote per share on matters to be voted on by shareholders.

Liquidation Rights

Rights and Preferences

TRUE LEAF MEDICINE INTERNATIONAL LTD.
Consolidated Statements of Financial Position

(Expressed in Canadian dollars)

The accompanying notes are an integral part of these consolidated financial statements.

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TRUE LEAF MEDICINE INTERNATIONAL LTD.
Consolidated Statements of Loss and Comprehensive Loss

(Expressed in Canadian dollars)

The accompanying notes are an integral part of these consolidated financial statements.

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TRUE LEAF MEDICINE INTERNATIONAL LTD.
Consolidated Statements of Changes in Shareholders' Equity (Deficit)

(Expressed in Canadian dollars)

The accompanying notes are an integral part of these consolidated financial statements.

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TRUE LEAF MEDICINE INTERNATIONAL LTD.
Consolidated Statements of Cash Flow

(Expressed in Canadian dollars)

Supplemental disclosure with respect to cash flow (Note 13)

The accompanying notes are an integral part of these consolidated financial statements.

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TRUE LEAF MEDICINE INTERNATIONAL LTD.
Notes to Consolidated Financial Statements
March 31, 2016

(Expressed in Canadian dollars)

1.         NATURE OF OPERATIONS AND GOING CONCERN

True Leaf Medicine International Ltd. (the "Company") was incorporated under the Business Corporations Act of the Province of British Columbia on June 9, 2014 and is the legal parent of True Leaf Investments Corp. ("TL Investments"), True Leaf Medicine Inc. ("TL Medicine") and True Leaf Pet Inc. ("TL Pet"). TL Investments, TL Medicine and TL Pet were all incorporated under the Business Corporations Act of the Province of British Columbia on March 26, 2014, July 4, 2013 and November 18, 2015 respectively. The Company's head office and registered office is located at Suite 1820, 925 West Georgia Street, Vancouver, BC V6C 3L2.

On May 23, 2014, TL Investments completed a Share Exchange Agreement with TL Medicine in which TL Investments issued 25,000,000 common shares valued at $1,250,000 for all of the outstanding common shares of TL Medicine (Note 4). The Share Exchange Agreement constituted a reverse takeover, with the sole shareholder of TL Medicine acquiring a control position in TL Investments.

On February 2, 2015, the Company executed a Plan of Arrangement as further described in Note 5. The Plan of Arrangement constituted a reverse takeover, with the shareholders of TL Investments acquiring a control position in the Company. As a result of the Plan of Arrangement, the consolidated financial statements have been presented as a continuation of TL Medicine. On February 9, 2015, the Company began trading on the Canadian Securities Exchange (the "CSE") under the symbol "MJ".

The Company, through TL Medicine, is seeking to become a licensed producer of medical marijuana under Canada's Marihuana for Medical Purposes Regulations ("MMPR") program administered by Health Canada. As at March 31, 2016, the Company does not have a license with the MMPR and no products are in commercial production or use. The Company has not been granted an MMPR license and will be required to satisfy additional obligations in order to qualify including the completion of a compliant facility on a parcel of leased land in Lumby, British Columbia. There is a significant risk that the Company will not receive an MMPR license, thus rendering the Company unable to proceed with its business model. The Company continues to work diligently to comply with all of the requirements of Health Canada.

As the Company awaits approval of its license application from Health Canada it is looking at new opportunities with hemp-based nutrition for pets. TL Pet has entered the Canadian market and is planning to enter the US natural pet product market with a product line consisting of hemp-based functional chews and supplemental products for pets.

(a)     Going Concern

These consolidated financial statements have been prepared on the going concern basis, which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. For the year ended March 31, 2016, the Company incurred a loss of $1,039,320 and has earned $37,330 in revenues since inception, all of which was associated with the Company`s TL Pet operations during the current year. The continued operations of the Company are dependent on its ability to generate future cash flows or obtain additional funding through private placement financings. Management is of the opinion that it does not have sufficient working capital to fund future operations and will require external financing. There is a risk that financing will not be available on a timely basis or on terms acceptable to the Company. These material uncertainties may cast significant doubt on the Company's ability to continue as a going concern.

These consolidated financial statements do not give effect to any adjustments which would be necessary should the Company be unable to continue as a going concern and, therefore, be required to realize its assets and discharge its liabilities in other than the normal course of business and at amounts different from

those reflected in the accompanying financial statements.

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TRUE LEAF MEDICINE INTERNATIONAL LTD.
Notes to Consolidated Financial Statements
March 31, 2016
(Expressed in Canadian dollars)

2.         BASIS OF PREPARATION

(a)     Statement of Compliance

These consolidated financial statements have been prepared using accounting policies consistent with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and interpretations of the International Financial Reporting Interpretations Committee ("IFRIC"). These consolidated financial statements were authorized for issue by its Directors on April 19, 2017.

(b)     Principles of consolidation

These consolidated financial statements incorporate the financial statements of the Company and its controlled subsidiaries.  Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities.  The consolidated financial statements include the accounts of the Company and its direct wholly-owned Canadian subsidiaries: TL Investments, TL Medicine and TL Pet. All significant intercompany transactions and balances have been eliminated on consolidation.

(c)     Basis of Measurement and Use of Estimates

The consolidated financial statements have been prepared on a historical cost basis, except for certain financial instruments which are measured at fair value. All amounts on the consolidated financial statements are presented in Canadian dollars which is the functional currency of the Company and its subsidiaries.

The preparation of these consolidated financial statements requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and reported amounts of expenses during the period. These estimates are, by their nature, uncertain. The impacts of such estimates are pervasive throughout the consolidated financial statements, and may require accounting adjustments based on future occurrences. Revisions to accounting estimates are recognized in the period in which the estimate is revised and future periods if the revision affects both current and future periods. These estimates are based on current and future economic conditions and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Significant assumptions about the future and other sources of estimation uncertainty that management has made at the reporting date that could result in a material adjustment to the carrying amounts of assets and liabilities, in the event that actual results differ from assumptions made, relate to, but are not limited to, the following:

(i)       Share-based payments and compensation

The Company has applied estimates with respect to the valuation of shares issued for non-cash consideration and shares determined to have been issued at a discount. Shares are valued at the fair value of the equity instruments granted at the date the Company receives the goods or services.

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TRUE LEAF MEDICINE INTERNATIONAL LTD.
Notes to Consolidated Financial Statements
March 31, 2016
(Expressed in Canadian dollars)

2.                   BASIS OF PREPARATION (cont'd...)

(i)       Share-based payments and compensation (cont'd...)

Prior to listing on the Exchange, the Company estimated the fair value of shares issued with reference to private placements with arm's length parties. The Company continues to be thinly traded and will continue this basis for measurement until such time that an active market is established for the Company's equity.

The Company measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. Estimating fair value for share- based payment transactions requires determining the most appropriate valuation model, which is dependent on the terms and conditions of the grant.

(ii)        Income taxes

The determination of income tax is inherently complex and requires making certain estimates and assumptions about future events. While income tax filings are subject to audits and reassessments, the Company has adequately provided for all income tax obligations. However, changes in facts and circumstances as a result of income tax audits, reassessments, jurisprudence and any new legislation may result in an increase or decrease in the Company's provision for income taxes.

3.                   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Financial instruments

Financial instruments consist of financial assets and financial liabilities and are initially recognized at fair value net of transaction costs, if applicable. Measurement in subsequent periods depends on whether the financial instrument has been classified as "fair value through profit or loss," "loans and receivables," "available-for-sale," "held-to-maturity," or "other financial liabilities" as follows:

(i) Financial assets

Financial assets classified as fair value through profit or loss are measured at fair value with unrealized gains and losses recognized in net loss for the period in which such gains or losses occur. The Company's cash and marketable securities are classified as fair value through profit or loss.

Financial assets classified as loans and receivables and held-to-maturity are measured at amortized cost using the effective interest rate method. Under this method, all cash flows from these instruments are discounted, where material, to their present value.  Over time, this present value is accreted to the future value of remaining cash flows, and this accretion is recorded as interest income. Certain of the Company's receivables are classified as loans and receivables and no financial assets have been classified as held-to-maturity.

Financial assets classified as available-for-sale are measured at fair value with unrealized gains and losses recognized in other comprehensive income except for losses in value that are considered other than temporary. Upon disposal of an available-for-sale financial asset, any accumulated other comprehensive

income or loss at the time of disposal is recognized in profit or loss. The Company does not hold any financial assets that have been classified as available-for-sale by the Company.

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TRUE LEAF MEDICINE INTERNATIONAL LTD.
Notes to Consolidated Financial Statements
March 31, 2016
(Expressed in Canadian dollars)

3.                   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd...)

Financial instruments (cont'd...)

Transaction costs associated with fair value through profit or loss financial assets are expensed as incurred, while transaction costs associated with all other financial assets are included in the initial carrying amount of the asset.

The Company assesses, at each reporting date, whether there is objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset and that event has an impact on the estimated future cash flows of the financial asset or group of financial assets.

ii) Financial liabilities

Financial liabilities classified as other financial liabilities are initially recognized at fair value less directly attributable transaction costs. After initial recognition, other financial liabilities are subsequently measured at amortized cost using the effective interest rate method. The effective interest rate method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period. The Company's accounts payable and accrued liabilities, debt component of convertible debt and amounts due to related parties are classified as other financial liabilities.

             Cash and cash equivalents

Cash and cash equivalents include cash on hand, bank deposits and short-term, highly liquid investments that are readily convertible to known amounts of cash and/or with original maturities of three months or less. As at March 31, 2016 and 2015, the Company did not hold any cash equivalents.

            Share capital

Common shares are classified as equity. Transaction costs directly attributable to the issue of common shares, warrants and stock options are recognized as a deduction from equity, net of any tax effects. Common shares issued for consideration other than cash are valued based on their market value at the date the shares are issued.

The Company has adopted a residual value method with respect to the measurement of shares and warrants issued as private placement units. The residual value method first allocates value to the more easily measurable component based on fair value and then the residual value, if any, to the less easily measurable component.

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TRUE LEAF MEDICINE INTERNATIONAL LTD.
Notes to Consolidated Financial Statements
March 31, 2016
(Expressed in Canadian dollars)

3.         SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd...)

Share capital (cont'd…)

The Company considers the fair value of common shares issued in the private placements to be the more easily measurable component and the common shares are valued at their estimated fair value. The balance, if any, is allocated to the attached warrants. Any fair value attributed to the warrants is recorded as reserves.

Share-based payments

The Company has a stock option plan that provides for the granting of options to Officers, Directors, related company employees and consultants to acquire shares of the Company.  The fair value of the options is measured on grant date and is recognized as an expense with a corresponding increase in reserves as the options vest.  

Options granted to employees and others providing similar services are measured at grant date at the fair value of the instruments issued.  Fair value is determined using the Black-Scholes option pricing model taking into account the terms and conditions upon which the options were granted.  The amount recognized as an expense is adjusted to reflect the actual number of share options that are expected to vest.   Each tranche in an award with graded vesting is considered a separate grant with a different vesting date and fair value. Each grant is accounted for on that basis. 

Options granted to non-employees are measured at the fair value of the goods or services received, unless that fair value cannot be estimated reliably, in which case the fair value of the equity instruments issued is used.  The value of the goods or services is recorded at the earlier of the vesting date, or the date the goods or services are received.

On vesting, share-based payments are recorded as an operating expense and as reserves.  When options are exercised the consideration received is recorded as share capital.  In addition, the related share-based payments originally recorded as reserves are transferred to share capital.  When an option is cancelled or expires, the initial recorded value is reversed and charged to reserves.

    Revenue Recognition

Revenue is measured at the fair value of the consideration received or receivable.  The Company recognizes revenue when the risks and rewards of ownership have been transferred to the buyer, the amount of revenue can be measured reliably and it is probable that future economic benefits will flow to the entity. The Company does not sell any of its current products on a consignment basis.

    Earnings (loss) per share

The Company presents basic and diluted earnings (loss) per share ("EPS") data for its common shares, calculated by dividing the profit or loss attributable to equity shareholders of the Company by the weighted average number of common shares issued and outstanding during the period.  Diluted EPS is calculated by adjusting the profit or loss attributable to equity shareholders and the weighted average number of common shares outstanding for the effects of all potentially dilutive common shares.  The calculation of diluted EPS assumes that the proceeds to be received on the exercise of dilutive stock options and warrants are used to repurchase common shares at the average market price during the period.  For the periods presented, the calculation proved to be anti-dilutive as the Company was in a loss position.

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TRUE LEAF MEDICINE INTERNATIONAL LTD.
Notes to Consolidated Financial Statements
March 31, 2016
(Expressed in Canadian dollars)

    Income taxes

Income tax expense consists of current and deferred tax expense.  Income tax expense is recognized in the statement of loss and comprehensive loss.  Current tax expense is the expected tax payable on the taxable income for the period, using tax rates enacted or substantively enacted at period end, adjusted for amendments to tax payable with regards to previous periods.

Deferred tax assets and liabilities are recognized for deferred tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. 

Deferred tax assets and liabilities are measured using the enacted or substantively enacted tax rates expected to apply when the asset is realized or the liability settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that substantive enactment occurs. A deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available against which the asset can be utilized.  To the extent that the Company does not consider it probable that a deferred tax asset will be recovered, the deferred tax asset is reduced.

            Inventories

Inventories include finished goods and supplies in respect of hemp-based nutrition for pets. The classification of inventories is determined by the stage in the manufacturing process. Finished goods inventories are valued based on the lower of actual production costs incurred or estimated net realizable value. Production costs include all direct manufacturing costs, freight, labour and other. Supplies are valued at the lower of average cost or net realizable value. If carrying value exceeds net realizable amount, a write-down is recognized. The write-down may be reversed in a subsequent period if the circumstances which caused it no longer exist.

Capital assets

Capital assets are carried at cost, less accumulated depreciation and accumulated impairment losses. Depreciation is recognized using the straight-line method at the following rates:

Office equipment - 5 years

Website costs - 3 years

Costs incurred toward the construction of a research facility on the Company's leased land will be deferred and capitalized until the facility is considered substantially complete and ready for use.

The Company's capital assets are reviewed for an indication of impairment at the end of each reporting period. If an indication of impairment exists, the asset's recoverable amount is estimated. Impairment losses are recognized in profit or loss. An impairment loss is reversed if there is an indication that there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of amortization, if no impairment loss had been recognized.

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TRUE LEAF MEDICINE INTERNATIONAL LTD.
Notes to Consolidated Financial Statements
March 31, 2016
(Expressed in Canadian dollars)

3.         SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd...)

Intangible asset

The Company owns an intangible asset consisting of costs associated with the acquisition of a trademark. Intangible assets are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses. Subsequent expenditures are capitalized only when they increase the future economic benefits embodied in the specific asset to which they relate. All other expenditures are recognized in profit or loss as incurred. The Company does not hold any intangible assets with indefinite lives.

Provisions

Provisions are recorded when a present legal, statutory or constructive obligation exists as a result of past events where it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the statement of financial position date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, if the effect is material, its carrying amount is the present value of those cash flows.

New standards not yet adopted

During the year ended March 31, 2016, there were no new IFRS or IAS accounting standards that became effective that had a material impact on the Company's consolidated financial statements. There are however a number of new standards and amendments to existing standards effective in future periods.

The following may impact the reporting and disclosures of the Company:

• Amendment to IFRS 7 Financial Instruments - Disclosures Changes were made to the offsetting of certain interim disclosures and the effective date is April 1, 2016.
• Amendment to IAS 34 - Interim Financial Reporting Changes were made to clarifying the reporting of redundant information and the effective date is April 1, 2016.
• New standard IFRS 9 "Financial Instruments" This new standard is a partial replacement of IAS 39 Financial Instruments: Recognition and Measurement. This new standard is tentatively effective for annual periods beginning on or after January 1, 2018.

The Company has not early adopted the amended and new standards and is currently assessing the impact that these standards will have on its consolidated financial statements.

On May 23, 2014, pursuant to the terms of the Share Exchange Agreement (the "Agreement"), TL Investments acquired 100% of the issued and outstanding capital stock of TL Medicine by issuing 25,000,000 common shares representing one common share of TL Investments for every ten common shares of TL Medicine. 

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TRUE LEAF MEDICINE INTERNATIONAL LTD.
Notes to Consolidated Financial Statements
March 31, 2016
(Expressed in Canadian dollars)

As a result of the Agreement, the former shareholder of TL Medicine (for accounting purposes) is considered to have acquired control of TL Investments. Accordingly, the Agreement has been accounted for as a reverse takeover. As TL Investments did not meet the definition of a business the transaction was accounted for as a purchase of the net assets (liabilities) of TL Investments. The net purchase price was determined as an equity settled share-based payment under IFRS 2, Share-based Payment. As TL Medicine is deemed to be the acquirer for accounting purposes, its assets and liabilities and operations since incorporation on July 4, 2013 are included in the consolidated financial statements at their historical carrying value. The consolidated financial statements are a continuation of TL Medicine in accordance with accounting standards. TL Investments' results of operations are included from May 23, 2014 onwards.

At the time of the execution of the Agreement, TL Investments was in a net liability position as follows:

On completion of the Agreement, TL Medicine recognized transaction costs of $1,322,402 associated with the acquisition of TL Investments, representing the fair value of the 25,000,000 common shares issued ($1,250,000), 550,000 common shares valued at $27,500 issued as finders' shares, as well as the net liabilities assumed on execution of the Agreement.

5.         PLAN OF ARRANGEMENT

In June 2014, the Company entered into a Plan of Arrangement (the "Arrangement") with Noor Energy Corporation ("Noor"), which was the former parent of the Company, and TL Investments for the purpose of becoming a publicly traded entity. The Arrangement was executed on February 2, 2015. Pursuant to the terms of the Arrangement:

(i)         TL Investments purchased all the issued and outstanding shares of the Company (the "Purchase Shares") from Noor for consideration of $20,000 (paid);

(ii)        The Company acquired all of the 37,083,330 outstanding shares of TL Investments from the TL Investments shareholders through a 1-for-1 share exchange;

(iii)       Noor issued 5,000 of its common shares to the Company and received in exchange 355,000 common shares of the Company (the "Distribution Shares");

(iv)       The Distribution Shares were distributed as dividends to Noor's shareholders on a pro rata basis; and

(v)        The Purchase Shares were then cancelled.

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TRUE LEAF MEDICINE INTERNATIONAL LTD.
Notes to Consolidated Financial Statements
March 31, 2016
(Expressed in Canadian dollars)

5.       PLAN OF ARRANGEMENT (cont'd…)

As a result of the Arrangement, the former shareholders of TL Investments (for accounting purposes) are considered to have acquired control of the Company. Accordingly, the Arrangement has been accounted for as a reverse takeover. As the Company did not meet the definition of a business, the transaction was accounted for as a purchase of the net assets of the Company. The net purchase price was determined as an equity settled share-based payment under IFRS 2, Share-based Payment. TL Medicine is deemed to be the acquirer for accounting purposes. The consolidated financial statements are a continuation of TL Medicine in accordance with accounting standards. The Company's results of operations are included from February 2, 2015 onwards. At the time of the execution of the Arrangement, the Company had net assets totaling $1 consisting of a nominal cash balance with no other assets or liabilities.

The listing expense of $49,949 was determined as follows:

(i)         Number of common shares of TL Investments held by former TL Investments shareholders outstanding prior to the RTO was 37,083,330 or 99.97% of the combined entity.

(ii)        Number of outstanding shares of the Company prior to the RTO is determined to be 10,000 or 0.03% of the combined entity.

(iii)       Estimated fair value of TL Investments being $5,562,500 based on the financing price of $0.15 per common share being completed concurrently with the RTO being executed. The Company had a fair value of $1,500 under these measurements.

(iv)       The difference between the fair value of the 200,000 shares (net of 155,000 shares subsequently returned to treasury and cancelled) issued ($30,000) being the consideration paid and the estimated fair value of the net assets of the Company of $1, in addition to the payment made to the Noor shareholders of $20,000 (net of the fair value of the 5,000 common shares of Noor that were received of $50), amounts to a listing expense of $49,949.

Upon issuance of the Distribution Shares, 155,000 shares were returned to treasury and immediately cancelled in accordance with the Arrangement.

6.         RECEIVABLES AND INVENTORIES

                Receivables

Trade receivables are non-interest bearing and are due within 30 days. As at March 31, 2016, the Company did not have any trade receivables that were past due. The Company's allowance for doubtful accounts at March 31, 2016 was $nil (2015 - $nil).

89

TRUE LEAF MEDICINE INTERNATIONAL LTD.
Notes to Consolidated Financial Statements
March 31, 2016
(Expressed in Canadian dollars)

6.         RECEIVABLES AND INVENTORIES (cont'd…)

During the year ended March 31, 2016, revenues from the two largest customers amounted to 96.57% of total sales. As at March 31, 2016, these two customers amounted to 99.9% of total trade receivables.

            Inventories

During the year ended March 31, 2016, the Company wrote off $2,081 (2015 - $nil) associated with inventory obsolescence.

7.         MARKETABLE SECURITIES

             In connection with the Arrangement (Note 5), the Company received 5,000 common shares of Noor Energy Corporation valued at $0.01 per share.

   8.       CAPITAL ASSETS

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